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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe IRS Just Released New 2020 Tax Brackets. Here's What They Mean.
Taxes may be one of the few certainties in life, but when it comes to understanding how they work, its normal to feel, well, uncertain.
Earlier this month, the IRS released updates to the tax code for tax year 2020, including higher income limits on tax brackets to account for inflation, which will affect how much you pay in income taxes when you file in 2021.
Not sure how these changes will impact your future tax bill? Heres a look at the 2020 tax brackets and what they mean. (Round your income to the nearest dollar.)
Understanding 2020 Tax Brackets
Taxes arent exactly the most straightforward concept, and a lot of people misunderstand how theyre taxed according to these brackets. For example, you might think that if youre single and earn $70,000 in 2020, all your income is taxed at 22%. Thats not the case.
The United States has a progressive tax system. This means that tax rates increase as a taxpayers income increases, said Logan Allec, a certified public accountant and owner of personal finance blog Money Done Right. He explained that only the income that falls within a particular tax brackets range is taxed at that corresponding rate.
Another thing to keep in mind that tax brackets only apply your taxable income, which is whats left over after subtracting your standard or itemized deductions, plus any other adjustments, according to Allec.
https://www.huffpost.com/entry/2020-tax-brackets-irs_l_5dcc893be4b0d43931cee664
lunatica
(53,410 posts)uponit7771
(90,367 posts)Don't expect any different this time
cbdo2007
(9,213 posts)and we literally paid zero tax last year due to the increased child tax credit and the higher standard deduction.
uponit7771
(90,367 posts)Last edited Fri Jan 3, 2020, 11:09 AM - Edit history (1)
... and the benefit capped off at 2 kids.
We were also SALT capped, that hurt bad
What Google says
- would have claimed five exemptions (5 x $4,050) and the standard deduction amount of $12,700 in 2017, reducing taxable income by $32,950
For 2018
- In 2018, a family of five (filing jointly) would only be entitled to the standard deduction of $24,000.Aug 16, 2018
Sherman A1
(38,958 posts)progressoid
(50,000 posts)JHB
(37,163 posts)Income taxes were more progressive during the Roaring Twenties than they are now ... and for the last 40 years.
former9thward
(32,097 posts)In the 1920s government did not need much money to run, Our military was almost non-existent. No government pensions. No medicare, etc. No government building projects to speak of. We didn't even have an interstate highway system in those years. Very few people employed by the government, So to compare the two periods for income tax purposes is apples and oranges.
JHB
(37,163 posts)I don't have the exact numbers in front of me, but I remember them well enough from when I was making the graph in #7 and others like it.
In the mid- to late-1920s the top marginal tax rate was 25% over 23 tax brackets: each bracket bumped the rate by 1% except for two of them, were it went up 1.5%. IIRC, adjusted for inflation, the top rate kicked in around $1.3 million.
So yes, that income tax structure was much more progressive than the one we have today. It's inadequate for modern needs, but it stands as a refutation of the idea that progressive taxation is some "socialist" notion (as Republicans are wont to do these days).
Speaking of 100 years ago, from 1919 to 1921 (in the wake of WW1) the income tax had its highest number of brackets: 56. Compare that to the 24 there were for most of the post-WW2/pre-Reagan prosperity, the 7 we have now, or the Republicans' Holy Grail of 1.
In an era where the most advanced mechanical calculator could do double duty as a workout machine, they managed to have 56 brackets. Lay that on the next person who complains that it's brackets that make the tax code complicated. The complexity is in all the other stuff. Brackets are just straight math. These days we can make tee shirts that can handle the calculation.
former9thward
(32,097 posts)The top 3% of taxpayers paid the majority of income taxes. The top 1409 taxpayers paid more tax than the bottom 70 million. The problem with all the people who say it is not progressive is that they never offer any actual facts for their arguments. Just allegations and internet rumors.
The average tax rate for the top 1% 26.9%
top 5% 23.5
top 10% 21.2
top 25 17.8
top 50 15.6
bottom 50 3.7
Now I know that won't make the people happy who want all the assets of the rich seized. But that is not what most Democrats want.
https://www.bloomberg.com/news/articles/2018-10-14/top-3-of-u-s-taxpayers-paid-majority-of-income-taxes-in-2016
klook
(12,171 posts)Good info for discussions about taxing billionaires as they should be taxed.
Freddie
(9,275 posts)And loaded in the new rates before running tomorrows pay. Looks like the rates went up for the 1st time I can remember. Helping the working guy, right?
former9thward
(32,097 posts)You had better reload....
JHB
(37,163 posts)...and how they've been collapsed downward. In 1955 there were 24 brackets, 16 of which kicked in at income above the equivalent of $250,000, and 11 of those kicked in at levels above the equivalent of half a million. The top marginal rate (then 19%) was on taxable income above the equivalent of ~$3.4 million.
From the article at the OP, for 2020:
Married, filing jointly:
10%: Up to $19,750
12%: Income of $19,751 to $80,250
22%: Income of $80,251 to $171,050
24%: Income of $171,051 to $326,600
32%: Income of $326,601 to $414,700
35%: Income of $414,701 to $622,050
37%: Income over $622,050
Bracket thresholds, adjusted for inflation, 1942-2013 (Married, filing jointly):
Note: the downward drift prior to the 1980s is because the rates at the time were not indixed for inflation. This is the classic "bracket creep", where someone whose income was keeping pace with inflation (i.e., their standard of living was merely holding steady) nevertheless had bigger and bigger bites taken out of their budget by taxes.
ck4829
(35,094 posts)Real funny.
Kaleva
(36,361 posts)at140
(6,110 posts)May be I should search at IRS.gov?