Your annual income taxes are based on the tax bracket you’re in–essentially, how much money you make. What many taxpayers do not realize is that the IRS actually modifies the tax brackets every year, in an effort to prevent bracket inflation.
This refers to individuals being elevated into higher tax brackets simply due to inflation, as opposed to a real increase in income. As such, it’s worth pausing to review your current tax bracket before doing any tax prep work for 2019’s taxable income.
How the IRS Protects Against Bracket Inflation
Before we get to the specific numbers, it might be illuminating to note exactly why and how these changes are made.
- The U.S. Tax Code has seen its federal income tax brackets adjusted annually, going back to the late 1980s.
- Inflation-related adjustments have become more numerous and more frequent in recent years.
- Currently, the tax code requires more than 50 inflation-driven computations to be made in order to determine exemption, exclusion, and deduction amounts.
- These 50 computations are in addition to the 40 computations made to inflation-adjust the tax bracket on a yearly basis.
Tax Brackets for Single Filers
With that background out of the way, what are the tax brackets for 2019’s taxable income? Here are the brackets for single filers:
- 10% bracket. For those with a taxable income between zero and $9,325, the tax rate is 10 percent.
- 15% bracket. For those whose taxable income is between $9,326 and $37,950, the amount owed is $932.50, plus 15% of the amount over $9,325.
- 25% bracket. For those whose taxable income is $37,951 through $91,900, the amount owed is $5,226.25 plus 25% of the amount over $37,950.
- 28% bracket. For those whose taxable income is between $91,901 and $191,650, the amount owed is $18,713.75 plus 28% of the amount over $91,900.
- 33% bracket. For those whose taxable income is between $191,651 and $416,700, the amount owed is $46,643.75 plus 33% over $191,650.
- 35% bracket. For those whose taxable income is between $416,701 and $418,400, the amount owed is $120,910.25 plus 35% of the amount over $416,700.
- 39.6% bracket. Finally, for those whose taxable income for the year is $418,401 or more, the amount owed is $121,505.25 plus 39.6% of the amount over $418,400.
Tax Brackets for Those Who are Married Filing Jointly
The rules are a bit different for married couples who file their taxes jointly.
- 10% bracket. For those whose total income is between zero and $18,650, the amount owed is 10% of taxable income.
- 15% bracket. For those whose total income is between $18,651 and $75,900, the amount owed is $1,865 plus 15% of the amount above $18,650.
- 25% bracket. For those whose combined income is between $75,901 and $153,100, the amount owed is$10,452.50 plus 25% of the amount above $75,900.
- 28% bracket. For those whose combined income is between $153,101 and $233,350, the amount due is $29,752.50 plus 28% of the amount over $153,100.
- 33%. For those whose combined income is between $233,351 and $416,700, the amount owed is $52,222.50 plus 33% of the amount over $233,350.
- 35% For those whose combined income is between $416,701 and $470,700, the amount owed is between $112,728.00 plus 35% of the amount over $416,700.
- 39.6% Finally, for those whose combined income is $470,701 or more, the amount owed is $131,628.00 plus 39.6% of the amount above $470,700.
Standard Deduction Amounts
Under the previous tax law, taxpayers are allowed to make a standard deduction (instead of an itemized one), subtracting this amount from their income before income tax is applied. The standard deduction amount was long set at $6,500 for single filers, and $13,000 for joint filers. Under the new GOP tax plan, which is effective in 2018, the standard deduction for single filers has increased to $12,000; for those filing jointly, it has increased to $24,000. This is at least in part to encourage more people to take the standard deduction, as opposed to the more complicated itemized deduction, which varies greatly from one person to the next. Indeed, it is expected that most individual tax returns will now take the standard deduction. There is a flipside to the coin, however: In addition to the standard deduction, tax filers could once claim a personal exemption of $4,150. Under the GOP tax plan, this has been reduced to zero dollars.
Understanding Your Tax Bracket
It is important to reiterate that tax brackets are always in flux–especially now, with tax code reform a political hot button. These amounts are applicable for your 2019 taxable income, but you will want to check on your tax brackets again for each future tax season. Understanding your bracket is the first step toward understanding how much you will ultimately pay in income tax.