Here's what you need to know about tax brackets in 2020 and beyond.

IMPORTANT: The U.S. government has extended tax season, pushing the deadline back to July 15.

Why do we have tax brackets?

Tax brackets are an integral part of what's referred to as America's progressive tax system. As you earn more money, your income hits thresholds. At each threshold, the income above the line is taxed at a progressively higher rate.

When looking at the brackets, it's essential to remember that the income triggering each tax rate is your adjusted gross income, not the figure on your W-2.

In other words, your ultimate tax bill is based on your taxable income: wages and other income, such as interest, minus deductions and credits.

The complexity has long resulted in calls for a simpler income tax system, such as a flat tax rate.

What are the current tax brackets?

These are the brackets for the taxes you pay in 2020, on income earned in 2019.

For individual taxpayers
Income Tax rate
Up to $9,700 10%
$9,701 to $39,475 12%
$39,476 to $84,200 22%
$84,201 to $160,725 24%
$160,726 to $204,100 32%
$204,101 to $510,300 35%
Over $510,300 37%
For couples filing jointly
Income Tax rate
Up to $19,400 10%
$19,401 to $78,950 12%
$78,951 to $168,400 22%
$168,401 to $321,450 24%
$321,451 to $408,200 32%
$408,201 to $612,350 35%
Over $612,350 37%

What does that all mean?

Portrait of young confused dark-skinned handsome man with afro hairstyle in checkered shirt holding head with hand, looking aside with satisfied expression, don't know what to do with debts
Cookie Studio / Shutterstock
Tax brackets can be very confusing.

Here's how the tax brackets work: If you file as a single and make $9,000, your tax rate is 10%. If you earn $30,000, your first $9,700 is taxed at 10%, while the remaining $20,300 carries a 12% tax. And so on.

As you make more money, you'll want to take steps to reduce your taxable income and drop down into a lower tax bracket. Directing some of your earnings into an individual retirement account (IRA) might do this.

You may need to speak with an accountant or tax professional, such as at the nearest H&R Block office.

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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