See the 2022 tax brackets
Each year, the IRS adjusts over 40 tax provisions for inflation. This is done to avoid what is known as ‘bracket slippage’, when people are pushed into higher tax brackets or have reduced value of credits and deductions due to inflation, instead of any increase in their actual income.
The IRS used the Consumer Price Index (CPI) as a measure of inflation before 2018.[1] However, with the Tax Cuts and Jobs Act of 2017, the IRS now uses the chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts and credit values accordingly.[2]
These inflation adjustments are for tax year 2021, for which taxpayers will be filing tax returns in early 2022. Note that the Tax Foundation is a 501 (c) (3) educational non-profit organization ) and cannot answer specific questions about your tax situation or assist you in tax matters. filing process.
Federal income tax brackets and rates 2021
In 2021, the income limits for all tax brackets and all tax filers will be adjusted for inflation and will be as follows (Tables 1). The top 37% marginal tax rate will affect taxpayers with taxable income of $ 523,600 and over for single filers and $ 628,300 and over for married couples filing jointly.
| 2021 tax rate | For single declarants | For married persons filing joint returns | For heads of household |
|---|---|---|---|
| ten% | Up to $ 9,950 | Up to $ 19,900 | Up to $ 14,200 |
| 12% | $ 9,951 to $ 40,525 | $ 19,901 to $ 81,050 | $ 14,201 to $ 54,200 |
| 22% | $ 40,526 to $ 86,375 | $ 81,051 to $ 172,750 | $ 54,201 to $ 86,350 |
| 24% | $ 86,376 to $ 164,925 | $ 172,751 to $ 329,850 | $ 86,351 to $ 164,900 |
| 32% | $ 164,926 to $ 209,425 | $ 329,851 to $ 418,850 | $ 164,901 to $ 209,400 |
| 35% | $ 209,426 to $ 523,600 | $ 418,851 to $ 628,300 | $ 209,401 to $ 523,600 |
| 37% | $ 523,601 or more | $ 628,301 or more | $ 523,601 or more |
|
Source: Tax Service |
|||
Lump-sum deduction and personal exemption 2021
The standard deduction for single filers will increase by $ 150 and $ 300 for married couples filing jointly (Table 2).
The personal exemption for 2021 remains abolished.
| Filing status | Deduction amount |
|---|---|
| Alone | $ 12,550 |
| Married Joint deposit | $ 25,100 |
|
Head of household |
$ 18,800 |
|
Source: Source of internal revenue |
|
Alternative Minimum Tax 2021 (AMT)
The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high income taxpayers from evading personal income tax. This parallel tax regime forces high-income taxpayers to calculate their tax bill twice: once under the regular income tax regime and once under the AMT. The taxpayer must then pay the higher of the two.
The AMT uses an alternative definition of taxable income called alternative minimum taxable income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are authorized to exempt a significant portion of their income from the AMTI. However, this exemption is gradually disappearing for high income taxpayers. AMT is levied at two rates: 26% and 28%.
The AMT exemption amount for 2021 is $ 73,600 for singles and $ 114,600 for married couples applying jointly (Table 3).
| Filing status | Amount of exemption |
|---|---|
| Unmarried persons | $ 73,600 |
| Married Joint deposit | $ 114,600 |
|
Source: Tax Service |
|
In 2021, the 28% AMT rate applies to the excess AMTI of $ 199,900 for all taxpayers ($ 99,950 for married couples filing separate returns).
AMT exemptions gradually disappear to 25 cents per dollar earned once the taxpayer’s AMTI reaches a certain threshold. In 2021, the exemption will begin to disappear at $ 523,600 in AMTI for single filers and at $ 1,047,200 for married taxpayers filing jointly (Table 4).
| Filing status | Threshold |
|---|---|
| Unmarried persons | $ 523,600 |
| Married Joint deposit | $ 1,047,200 |
|
Source: Source of internal revenue |
|
2021 Labor Income Tax Credit (EITC)
The maximum Income Tax Credit (EITC) in 2021 for single and spousal filers is $ 543, if the filer has no children (Table 5). The maximum credit is $ 3,618 for one child, $ 5,980 for two children and $ 6,728 for three or more children. All of these increases are relatively small compared to 2020.
| Filing status | No children | A child | Two children | Three or more children | |
|---|---|---|---|---|---|
| Single or head of family | Income at Max Credit | $ 7,100 | $ 10,640 | $ 14,950 | $ 14,950 |
| Maximum credit | $ 543 | $ 3,618 | $ 5,980 | $ 6,728 | |
| Phasing out begins | $ 8,880 | $ 19,520 | $ 19,520 | $ 19,520 | |
| End of phase-out (credit equal to zero) | $ 15,980 | $ 42,158 | $ 47,915 | $ 51,464 | |
| Married Joint deposit | Income at Max Credit | $ 7,100 | $ 10,640 | $ 14,950 | $ 14,950 |
| Maximum credit | $ 543 | $ 3,618 | $ 5,980 | $ 6,728 | |
| Phasing out begins | $ 14,820 | $ 25,470 | $ 25,470 | $ 25,470 | |
| End of phase-out (credit equal to zero) | $ 21,920 | $ 48,108 | $ 53,865 | $ 57,414 | |
|
Source: Source of internal revenue |
|||||
Child tax credit 2021
The child tax credit totals $ 2,000 per eligible child and is not adjusted for inflation. However, the refundable portion of the child tax credit is adjusted for inflation, but will remain at $ 1,400 for 2021.
2021 Capital Gains Tax Rates and Brackets (Long-Term Capital Gains)
Long-term capital gains are taxed at different brackets and rates from ordinary income.
| For unmarried persons, taxable income greater than | For married people filing joint returns, taxable income greater than | For heads of household, taxable income greater than | |
|---|---|---|---|
| 0% | $ 0 | $ 0 | $ 0 |
| 15% | $ 40,400 | $ 80,800 | $ 54,100 |
| 20% | $ 445,850 | $ 501,600 | $ 473,750 |
|
Source: Source of internal revenue |
|||
Deduction for eligible business income 2021 (section 199A)
The Tax Cuts and Jobs Act provides for a 20% deduction for intermediate businesses against up to $ 164,900 in qualifying business income for unmarried taxpayers and $ 329,800 for married taxpayers (Table 7).
| Filing status | Threshold |
|---|---|
| Unmarried persons | $ 164,900 |
| Married Joint deposit | $ 329,800 |
|
Source: Source of internal revenue |
|
2021 Annual exclusion for gifts
In 2021, the first $ 15,000 donated to anyone is tax exempt. The exclusion is increased to $ 159,000 for gifts to spouses who are not citizens of the United States.
[1] Internal Revenue Service, “Income Procedure 2020-45,” https://www.irs.gov/pub/irs-drop/rp-20-45.pdf.
[2] Robert Cage, John Greenlees and Patrick Jackman, “Introducing the Chained Consumer Price Index”, US Bureau of Labor Statistics, May 2003, https://www.bls.gov/cpi/additional-resources/chained-cpi -introduction. pdf.
Banner Image Attribution: Tax Form 1040 is near one hundred dollar bills and blue pen on light blue background. Personal Income Tax Return in the United States.
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