Filing Status & Witholding

"Always have last year's federal and state tax returns handy when you're doing your taxes. There are a number of items which can save you money if you know where to look."
-Howard Choder

A key to tax planning is knowing your marginal tax rate. That’s the rate that applies at the margin, to your top dollar of income. Under our graduated income tax system, as income rises, not only does your tax bill go up but the percentage of that income claimed by the government also increases.

Your marginal rate is affected by your filing status. While everyone faces the same seven tax brackets, the brackets hold different amounts of income depending on whether your file as a single person, for example, or you are married and file a joint return with your husband or wife. The wider the brackets, the slower you march up into higher rates. Starting in 2019, the top bracket is now 37%, coupled with the additional Medicare Tax of 3.8%, which means the top bracket is really 40.8%. In essence, if you are in the top bracket, you get to take home 59% of your income.

Knowing your marginal rate is essential because it lets you determine how much of any extra earnings – from investments, a raise or moonlighting – you get to keep. It also measures the saving power of deductible expenses. Only if you know your tax bracket can you pinpoint what a charitable contribution or a business expense really costs you after your tax savings are taken into account.

The bottom line is this: knowing how high your tax bracket is can help you understand your tax-planning efforts. 

2021 Tax Table

Schedule X
Single

If taxable income is over But not over The tax is:
$0 $9,950 10% of the amount over $0
$9,951 $40,525 $995 plus 12% of the amount over $9,950
$40,526 $86,375 $4,664 plus 22% of the amount over $40,525
$86,376 $164,925 $14,751 plus 24% of the amount over $86,375
$164,926 $209,425 $33,603 plus 32% of the amount over $164,925
$209,426 $523,600 $47,843 plus 35% of the amount over $209,425
$523,601 no limit $157,804.25 plus 37% of the amount over $523,600

Schedule Y-1
Married Filing Jointly or Qualifying Widow(er)

If taxable income is over– But not over– The tax is:
$0 $19,900 10% of the amount over $0
$19,901 $81,050 $1,990 plus 12% of the amount over $19,900
$81,051 $172,750 $9,328 plus 22% of the amount over $81,050
$172,751 $329,850 $29,502 plus 24% of the amount over $172,750
$329,851 $418,850 $67,206 plus 32% of the amount over $329,850
$418,851 $628,300 $95,686 plus 35% of the amount over $418,850
$628,301 no limit $168,993.50 plus 37% of the amount over $628,300

Schedule Y-2
Married Filing Separately

If taxable income is over– But not over– The tax is:
$0 $9,950 10% of the amount over $0
$9,951 $40,525

$995 plus 12% of the amount over $9,950

$40,526 $86,375

$4,664 plus 22% of the amount over $40,525

$86,376 $164,925

$14,751 plus 24% of the amount over $86,375

$164,926 $209,425

$33,603 plus 32% of the amount over $164,925

$209,426 $314,150

$47,843 plus 35% of the amount over $209,425

$314,151 no limit

$84,496.75 plus 37% of the amount over $314,150

Schedule Z
Head of Household

If taxable income is over– But not over– The tax is:
$0 $14,200 10% of the amount over $0
$14,201 $54,200

$1,420 plus 12% of the amount over $14,200

$54,201 $86,350

$6,220 plus 22% of the amount over $54,200

$86,351 $164,900

$13,293 plus 24% of the amount over $86,350

$164,901 $209,400

$32,145 plus 32% of the amount over $164,900

$209,401 $523,600

$46,385 plus 35% of the amount over $209,400

$523,601 no limit

$156,355 plus 37% of the amount over $523,600