Knowing the federal income tax brackets for the 2020 and 2021 tax year can help you maximize tax savings and retain more of your hard-earned money. The U.S. has a progressive tax system, meaning the higher your taxable income, the higher your tax rate. The income tax rates go up in steps called tax brackets. There are seven brackets that apply to taxpayers’ ordinary income: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Each year the IRS makes inflation adjustments to increase the tax brackets. With each new year you can earn a bit more before being taxed at a higher tax rate.
