It's never too early to start thinking about your next tax return. For most Americans, that'll be your federal tax return for the 2020 tax year — which, by the way, will be due on April 15, 2021 (or October 15, 2021, if extended). The 2020 tax rates themselves are the same as the rates in effect for the 2019 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, as they are every year, the 2020 tax brackets were adjusted to account for inflation. That means you could wind up in a different tax bracket when you file your 2020 return than the bracket you were in before – which also means you'll be paying a different tax rate on some of your income.

  • SEE MORE Tax Changes and Key Amounts for the 2020 Tax Year

The tax bracket ranges also differ depending on your filing status. For example, the 22% tax bracket for the 2020 tax year goes from $40,126 to $85,525 for single taxpayers, but it starts at $53,701 and ends at $85,500 for head-of-household filers.

The difference between bracket ranges sometimes creates a "marriage penalty." This tax-law twist makes certain married couples filing a joint return — typically, where the spouses' incomes are similar — pay more tax than they would if they were single. The penalty is triggered when, for any given rate, the minimum taxable income for the joint filers' tax bracket is less than twice the minimum amount for the single filers' bracket. Before the 2017 tax reform law, this happened in the four highest tax brackets. But now, as you can see in the tables below, only the top tax bracket contains the marriage penalty trap. As a result, only couples with a combined taxable income over $622,050 are at risk when filing their 2020 federal tax return. (Note that the tax brackets for your state's income tax could contain a marriage penalty.)

2020 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax RateTaxable Income
(Single)
Taxable Income
(Married Filing Jointly)
10%Up to $9,875Up to $19,750
12%$9,876 to $40,125$19,751 to $80,250
22%$40,126 to $85,525$80,251 to $171,050
24%$85,526 to $163,300$171,051 to $326,600
32%$163,301 to $207,350$326,601 to $414,700
35%$207,351 to $518,400$414,701 to $622,050
37%Over $518,400Over $622,050

2020 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

Tax RateTaxable Income
(Married Filing Separately)
Taxable Income
(Head of Household)
10%Up to $9,875Up to $14,100
12%$9,876 to $40,125$14,101 to $53,700
22%$40,126 to $85,525$53,701 to $85,500
24%$85,526 to $163,300$85,501 to $163,300
32%$163,301 to $207,350$163,301 to $207,350
35%$207,351 to $311,025$207,351 to $518,400
37%Over $311,025Over $518,400

How the Tax Brackets Work

Suppose you're single and have $90,000 of taxable income in 2020. Since $90,000 is in the 24% bracket for singles, would your tax bill simply be a flat 24% of $90,000 – or $21,600? No! Your tax would actually be less than that amount. That's because, using marginal tax rates, only a portion of your income would be taxed at the 24% rate. The rest of it would be taxed at the 10%, 12%, and 22% rates.

Here's how it works. Again, assuming you're single with $90,000 taxable income in 2020, the first $9,875 of your income is taxed at the 10% rate for $988 of tax. The next $30,250 of income (the amount from $9,875 to $40,125) is taxed at the 12% rate for an additional $3,630 of tax. After that, the next $45,400 of your income (from $40,126 to $85,525) is taxed at the 22% rate for $9,988 of tax. That leaves only $4,475 of your taxable income (the amount over $85,525) to be taxed at the 24% rate, which comes to an addition $1,074 of tax. When you add it all up, your total 2020 tax is only $15,680. (That's $5,920 less than if a flat 24% rate was applied to the entire $90,000.)

  • SEE MORE When Are 2020 Estimated Tax Payments Due?

Now, suppose you're a millionaire (we can all dream, right?). If you're single, only your 2020 income over $518,400 is going to be taxed at the top rate (37%). The rest will be taxed at lower rates as described above. So, for example, the tax on $1 million for a single person in 2020 is $334,427. That's a lot of money, but it's still $35,573 less than if the 37% rate were applied as a flat rate on the entire $1 million (which would result in a $370,000 tax bill).

2019 Tax Brackets

For comparison's sake, here are the 2019 federal income tax brackets.

2019 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax RateTaxable Income
(Single)
Taxable Income
(Married Filing Jointly)
10%Up to $9,700Up to $19,400
12%$9,701 to $39,475$19,401 to $78,950
22%$39,476 to $84,200$78,951 to $168,400
24%$84,201 to $160,725$168,401 to $321,450
32%$160,726 to $204,100$321,451 to $408,200
35%$204,101 to $510,300$408,201 to $612,350
37%Over $510,300Over $612,350

2019 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

Tax RateTaxable Income
(Married Filing Separately)
Taxable Income
(Head of Household)
10%Up to $9,700Up to $13,850
12%$9,701 to $39,475$13,851 to $52,850
22%$39,476 to $84,200$52,851 to $84,200
24%$84,201 to $160,725$84,201 to $160,700
32%$160,726 to $204,100$160,701 to $204,100
35%$204,101 to $306,175$204,101 to $510,300
37%Over $306,175Over $510,300
  • SEE MORE 20 IRS Audit Red Flags

All contents copyright 2020 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC

Recommended for you

Load comments