Personal Finance Taxes

Q&A: How do tax brackets work?

The U.S. federal government collects taxes based on income. The structure they collect these taxes are based on marginal tax brackets. Looking at the 2020 federal tax brackets below, a single person’s first $9,875 of taxable income is taxed at 10%, while the next $30,250 (40,125 – 9,875) is taxed at a rate of 12%. As someone makes more money and moves up the brackets, they pay more and more tax per dollar earned.

2020 Federal Tax Brackets

Tax rateSingleMarried Filing Jointly (MFJ)Married Filing Separately (MFS)Head of Household (HOH)
10%$0 to $9,875$0 to $19,750$0 to $9,875$0 to $14,100
12%$9,876 to $40,125$19,751 to $80,250$9,876 to $40,125$14,101 to $53,700
22%$40,126 to $85,525$80,251 to $171,050$40,126 to $85,525$53,701 to $85,500
24%$85,526 to $163,300$171,051 to $326,600$85,526 to $163,300$85,501 to $163,300
32%$163,301 to $207,350$326,601 to $414,700$163,301 to $207,350$163,301 to $207,350
35%$207,351 to $518,400$414,701 to $622,050$207,351 to $311,025$207,351 to $518,400
37%over $518,400over $622,050over $311,025over $518,400

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