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While 2019 has yet to formally come to a close, many people still want to look forward. As they begin to prepare their taxes for the 2019 tax year, filers who want to get ahead for the 2020 tax year should start planning. By understanding the 2020 income tax brackets, you can make wise choices regarding your income, possible deductions, retirement plan contributions, and more. Here’s a look at what 2020 has in store.

How Tax Brackets Work

Many people wrongly assume that their tax bracket dictates the rate they pay on all of their income. However, that isn’t how the tax system works. Instead, the rate only applies to the income within that particular range. For example, single filers who have $12,000 in taxable income during the 2020 tax year mistakenly believe that they owe 12 percent on all of it – which would make their owed tax total $1,440 – but that isn’t the case.

In 2020, the person above will pay 10 percent on the first $9,875 of their taxable income, even if they earn more. That $9,875 falls into the first tax bracket, which has a 10 percent rate. They only owe 12 percent on the taxable income above $9,875 up to the $40,125 mark, as the amount above $40,125 goes into the next higher bracket).

A person who earns $12,000 during the tax year will pay 10 percent of the first $9,875, or $987.50. Then, they owe 12 percent on the remaining $2,175, or $225. That makes their total $1,242.50.

This makes tax brackets look fairly complex. However, once you understand how they work, it’s possible to handle the calculations, allowing you to plan.

2020 Income Tax Brackets for Single Filers

If you aren’t married during 2020 and don’t qualify as a surviving spouse or head of household, the following tax brackets will apply:

Income from $0 to $9,875 – 10 percent
Income from $9,875 to $40,125 – 12 percent
Income from $40,125 to $85,525 – 22 percent
Income from $85,525 to $163,300 – 24 percent
Income from $163,300 to $207,350 – 32 percent
Income from $207,350 to $518,400 – 35 percent
Income above $518,400 – 37 percent

2020 Income Tax Brackets for Head of Household Filers

If you aren’t married but provide financial support or a home to a qualifying relative – such as a child or parent – you may qualify as a head of household. This gives you a different filing status, and you’re tax burden will align with the brackets below:

Income from $0 to $14,100 – 10 percent
Income from $14,100 to $53,700 – 12 percent
Income from $53,700 to $85,500 – 22 percent
Income from $85,500 to $163,300 – 24 percent
Income from $163,300 to $207,350 – 32 percent
Income from $207,350 to $518,400 – 35 percent
Income above $518,400 – 37 percent

2020 Income Tax Brackets for Married Filing Jointly Taxpayers

If you are married and you are filing jointly with your spouse, you’ll use these brackets. Additionally, surviving spouses may be able to use these brackets for a period following the death of their spouse:

Income from $0 to $19,750 – 10 percent
Income from $19,750 to $80,250 – 12 percent
Income from $80,250 to $171,050 – 22 percent
Income from $171,050 to $326,600 – 24 percent
Income from $326,600 to $414,700 – 32 percent
Income from $414,700 to $622,050 – 35 percent
Income above $622,050 – 37 percent

2020 Income Tax Brackets for Married Filing Separately Taxpayers

Married couples do have the option of filing separate returns. If you choose this route, here are your tax brackets:

Income from $0 to $9,875 – 10 percent
Income from $9,875 to $40,125 – 12 percent
Income from $40,125 to $85,525 – 22 percent
Income from $85,525 to $163,300 – 24 percent
Income from $163,300 to $207,350 – 32 percent
Income from $207,350 to $311,025 – 35 percent
Income above $311,025 – 37 percent

2020 Trust and Estate Tax Brackets

Not everyone is aware that trusts and estates pay income taxes, but they do. Any retained income (money that isn’t distributed to beneficiaries) are taxed based on the following brackets:

Income from $0 to $2,600 – 10 percent
Income from $2,600 to $9,450 – 24 percent
Income from $9,450 to $12,950 – 35 percent
Income above $12,950 – 37 percent

Why Do Tax Brackets Change from One Year to Another?

There are several reasons why a tax bracket may change. In some cases, they are adjusted for inflation, reflecting the shift in the buying power of a dollar. In others, Congress and the President pass legislation that alters the brackets. For example, the tax reform efforts that happened as 2017 drew to a close are affecting the 2020 tax brackets. That legislation will keep having an impact until the start of 2026 unless new action is taken prior to that time.

Planning for Your 2020 Taxes

By referring to the brackets above, you can estimate your 2020 tax bill. However, if you do decide to perform the calculations, it’s important to remember that these brackets apply to your taxable income, not all of the money you make. You’ll need to account for any deductions you may receive to determine what your taxable income will look like in the coming year to get a more accurate picture.

It’s also possible to use the tables above to see how certain financial moves impact your tax bracket and rates. Certain deductions, like contributing to tax-deferred retirement accounts, reduce your taxable income, and are under your control, at least to a degree. For example, you can see how contributing various amounts (up to the maximum) to a tax-deferred retirement account impacts your tax bill, allowing you to decide how you want to fund that account in 2020.

Ultimately, the brackets above are a potential planning tool. It allows you to make wise choices that could lower your tax burden or understand how certain financial situations will affect what you owe. That way, you can have more control over what you pay or, at least, be prepared for the bill that will inevitably come.

Do you worry about your tax bracket? Why or why not? Share your thoughts in the comments below.

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