Earlier this week, the IRS announced the 2021 tax year annual inflation adjustments for more than 60 tax previsions. Those include tax rate schedules and other tax changes.
Everyone who pays taxes is grouped into seven brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The changes have been made to keep pace with cost-of-living adjustments.
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The following are the 2021 tax rates, which will be used when filing taxes in 2022 for the previous year of income.
So what exactly do these numbers mean, anyway?
In so many words, taxpayers with higher incomes will have higher federal income tax rates. Taxpayers with lower incomes with have lower federal tax rates.
Where you fall into the tax bracket is unmistakably determined by your income.
For instance, someone who is filing single and makes $60,000 will have to pay 22% of the amount over $40,525. This actually means this taxpayer is in the 12% bracket.
While the tax-rate changes are the most notable for taxpayers, there are other changes worth examining.
Click or tap here to learn about more changes that have come with tax inflation adjustments for tax year 2021.