The rewrite of the tax code kept seven tax brackets, but dropped nearly all of the rates. While the bottom rate remains at 10%, the highest rate fell to 37%, from the 39.6% it has been in years past. The income limits for all tax brackets are adjusted each year for inflation. Below are the federal tax brackets and rates you can expect for tax year 2021.
Table for Tax Brackets and Rates
|Rate||Unmarried Individuals with Taxable Income Over||Married Individuals Filing Jointly with Taxable Income Over||Heads of Households with Taxable Income Over|
One of the largest changes seen in new tax law, was the repeal of personal exemptions ($4,050 for yourself, your spouse and each of your dependents) and the significant increase in the standard deduction. Changes to deductions, including the $10,000 cap on state, local and property tax deductions has left more people taking the standard deduction than itemizing their deductions as they have done in the past.
2020 Table for Standard Deduction
|Married, Filing Jointly||$25,100|
|Head of Household||$18,800|
*With The American Rescue Plan comes temporarily expanded child tax credits for 2021. It allows for 17-year olds to qualify for the credit, and it increases the credit to $3,000 per child ($3,600 per child under 6) for many families.
You can estimate your 2021 federal tax liability by using our calculator. Also, look further at whether to itemize or take the standard deduction.
*Updated May 2021