Tax Bracket

What Is a Tax Bracket?

A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat.

Federal Income Tax Brackets

As of 2021, the federal individual income tax in the U.S. has rates ranging from 10 percent to 37 percent. As you can see in the table below, tax rates increase with income levels, resulting in what’s called a “progressive” income tax system. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. Explore the latest tax brackets.

2021 Tax Brackets for Single Filers, Married Couples Filing Jointly, and Heads of Households
Tax Rate For Single Filers, Taxable Income For Married Individuals Filing Joint Returns, Taxable Income For Heads of Households, Taxable Income
10% 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% Over $523,600 Over $628,300 Over $523,600

Source: Internal Revenue Service

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State Tax Individual Income Tax Brackets

State individual income taxes range from single-rate flat taxes to Hawaii’s 12-bracket system. Many states have several narrow tax brackets close together at the low end of the income scale, including a zero bracket created by standard deductions and exemptions. These can yield a tax system that is functionally flat, since most taxable income is exposed to the top marginal rate. On the other hand, some states impose progressive rate structures that can cause individuals and noncorporate businesses to alter their income-earning and tax-planning behavior.

Connecticut and New York apply the rate of the top income tax bracket to previous taxable income after the taxpayer crosses the top bracket threshold, which is known as income recapture, while Arkansas imposes different tax tables depending on the filer’s level of income. Income recapture provisions are poor policy, because they result in dramatically high marginal tax rates at the point of their kick-in, and they are nontransparent in that they raise tax burdens substantially without being reflected in the statutory rate.

Corporate Income Taxation

Traditional arguments for graduated-rate taxation have little bearing on corporate taxation, since the size of a company is not reflective of the overall income of its owners or investors. In contrast to the individual income tax, there is no meaningful “ability to pay” concept in corporate taxation, and single-rate corporate income tax systems are most consistent with the sound tax principles of simplicity and neutrality.

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