Tax Brackets: How Much Tax You Owe
Aug 21, 2023 By John Davis

Understanding the tax brackets and how much you owe in taxes can be daunting for many, especially when considering the ever-changing nature of the income tax system.

However, once you understand what your bracket is and how it's calculated – along with other important deductions like personal exemptions and credits that are also factored into one's final bill or refund – navigating through your filing process becomes much simpler!

In this blog post, let's dive deep into understanding which tax bracket applies to you and review additional deductions to make your taxes more manageable at year-end.

What Is a Tax Bracket

Tax brackets are the ranges of income that determine how much tax you owe to Uncle Sam. For most taxpayers, your taxable income will determine which bracket applies. Tax brackets are typically organized by filing status (single, married, filing jointly, etc.) and range from as low as 10% up to 37%.

For example, if your 2020 taxable income as a single filer falls between $0 and $9,875, you would be taxed at 10%. Any income between $9,876 and $40,125 will be taxed 12%, with the remaining brackets increasing to 37% for taxable incomes over $518,400.

Understanding Tax Brackets And Marginal Tax Rates

It's important to note that while you're taxed at a certain tax bracket, it doesn't mean all of your income is subjected to the same rate. Instead, each part of your taxable income will be taxed at different rates. This concept is referred to as marginal tax rates and affects how much you pay in taxes until you reach the top of your tax bracket.

For instance, for a single filer in 2020, the first $9,875 of taxable income would be taxed at 10%. The next portion – from $9,876 to $40,125 – will be taxed 12%, while any higher amount will be subject to 22%. If and when your taxable income exceeds $86,375, the rate jumps to 24%. This pattern continues until you reach the top of your tax bracket.

Tax Rates VS. Tax Brackets

When looking at your tax bracket, it's easy to confuse the rate you pay from one year with another. In reality, this isn't always the case; while tax rates tend to remain unchanged, tax brackets can and often do change yearly due to inflation adjustments. As a result, what may have been taxed in one year at 12% could be taxed in the following year at 22%.

It's also important to note that tax brackets only apply to federal income taxes, so if you live in a state with an income tax, your rate could differ from what is listed on the federal level. That being said, knowing and understanding your tax bracket is still an important part of filing your taxes accurately each year.

Additional Deductions to Consider

In addition to understanding your tax bracket, there are other deductions you can take advantage of to help reduce the taxes you owe or increase your refund at the end of the year.

These include deductions for charitable donations, medical expenses, and certain types of investments. It's important to note that these deductions vary yearly, so it's best to consult with a tax professional or the IRS for the most up-to-date information.

Additionally, you can take advantage of credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). These two forms of credit can significantly reduce the taxes you owe and help increase your refund.

It's important to remember that credits differ from deductions because a credit is a dollar-for-dollar reduction of taxes owed, while deductions reduce taxable income.

Brackets And Rates-2022 &' 2023

As mentioned earlier, tax brackets are subject to change each year due to inflation. This means that for 2022 and 2023, you may be in a different bracket than the previous year. It's important to stay up-to-date on any changes that may occur during the next two years so you can accurately file your taxes when it's time.

Additionally, the Tax Cuts and Jobs Act of 2017 (TCJA) significantly changed the tax brackets for individuals. This act expires in 2025, so it's important to factor this into your calculations when considering how much tax you may owe or how much refund you will receive at the end of each year.

Pros And Cons of Paying Taxes

Paying taxes is an unavoidable part of life and can be a major source of stress for many. While there are some drawbacks to filing your taxes, such as paying money or dealing with complex forms, it's important to note the benefits of filing them accurately and on time.

Taxes go towards various government services, such as national defense and public education. Paying your taxes can also help create jobs, strengthen the economy, and fund programs that benefit society, such as Social Security and Medicare.

Additionally, you may be eligible for tax credits or deductions that can reduce your overall bill or increase your refund at the end of each year.

Understanding your tax bracket and all the deductions or credits you may qualify for is important to maximize your refund and minimize any stress associated with filing taxes. With the right preparation, filing your taxes doesn't have to be a daunting task!


How Much Can I Earn Before I Pay 40% Tax?

In the current 2021 tax year, if you’re single and earning more than $523,600 or married filing jointly and earning more than $628,300, your income over these limits will be taxed at 37%. If you earn above $207,351 as a single filer or $414,701 as a joint filer in 2021, any income over this limit will be taxed at 35%.

What Are the Personal Exemptions?

Personal exemptions are standard deductions that taxpayers can take to reduce their taxable income. For 2021 and 2022, personal exemption amounts are $12,550 for single filers and $25,100 for married couples filing jointly. If you qualify for these deductions, your taxable income will be reduced by that amount.

What Are Tax Credits?

Tax credits are another way to reduce your tax bill - and they’re even better than deductions because they reduce the taxes you owe dollar-for-dollar. Many tax credits are available, so research which ones you qualify for to ensure you’re taking advantage of them. Some examples include the Child Tax Credit, Earned Income Tax Credit, Retirement Savings Contributions Credit, and American Opportunity Tax Credit.


Tax brackets play a vital role in the overall taxation system. It would be best to understand how your income falls into different tax brackets, which bracket you are in, and the associated rate for that bracket. This knowledge can help you better understand your taxes and plan for what you owe each year. As discussed in this blog post, Federal and State tax brackets should be considered when filing taxes. With this blog post illuminating the complex subject of taxation and its brackets, we hope readers have improved their understanding of their tax situation and what they owe - federally and state-wide.