Legal Definitions - tax bracket

A tax bracket is a range of income that is subject to a specific tax rate. The United States Federal tax system is a progressive tax system, which means that the taxation progressively increases as a taxpayer’s income grows. Low incomes fall into the tax brackets with lower tax rates, while the higher incomes fall into brackets with higher tax rates. The tax bracket only applies to a specific range of income, not necessarily to all of the person’s income.

For example, a single filing person with $20,000 of income in 2021 would be taxed 10% for the first $9,950 and 12% for the next $10,050, not 12% for the whole $20,000. As of 2021, there are currently seven federal tax brackets in the United States, ranging from 10% to 37%. Married filers have different tax brackets than single filers.

Here is an example of the tax brackets for single filers in 2021:

• 10% for income up to $9,950
• 12% for income between $9,951 and $40,525
• 22% for income between $40,526 and $86,375
• 24% for income between $86,376 and $164,925
• 32% for income between $164,926 and $209,425
• 35% for income between $209,426 and $523,600
• 37% for income over $523,600

So, if a single filer had an income of $50,000 in 2021, they would be taxed:

• 10% on the first $9,950 = $995
• 12% on the next $30,575 ($40,525 - $9,950) = $3,669
• 22% on the remaining $9,475 ($50,000 - $40,525) = $2,084.50
• Total tax owed = $7,748.50

Similarly, here is an example of the tax brackets for married filers in 2021:

• 10% for income up to $19,900
• 12% for income between $19,901 and $81,050
• 22% for income between $81,051 and $172,750
• 24% for income between $172,751 and $329,850
• 32% for income between $329,851 and $418,850
• 35% for income between $418,851 and $628,300
• 37% for income over $628,300

So, if a married couple had a combined income of $150,000 in 2021, they would be taxed:

• 10% on the first $19,900 = $1,990
• 12% on the next $61,150 ($81,050 - $19,900) = $7,338
• 22% on the next $91,700 ($172,750 - $81,050) = $20,174
• 24% on the remaining $27,250 ($150,000 - $172,750) = $6,540
• Total tax owed = $35,042

These examples illustrate how tax brackets work and how the tax rate increases as income increases.