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2020 Tax Brackets

Financial Planning

January is the time to start thinking about how to handle your 2020 finances in a tax-efficient way. The seven IRS  tax rates for the 2020 tax year didn't change (they are the same as those in affect for the 2019 calendar year), however the tax bracket ranges were modified based on inflation. So, you could be in a different tax bracket for 2020 than the last time you reported your taxes, even if your income has not changed.1

Tax Brackets Are Marginal

The IRS divides income into different tax rates. Each subsequent portion of your income will have an increased tax rate. For example, if you make $40,125 in 2020, your first $9,875 will be taxed at 10 percent. The next portion of your income will be taxed at an increased rate; from $9,875 to $40,125, your tax rate will be 12 percent. 

As your income increases, you’ll fall into higher tax brackets and will have a higher tax rate for each portion of your income. 

Why Would My Tax Bracket Be Different? 

The IRS regularly adjusts tax brackets to take inflation into consideration. This is because, with inflation, people will face higher prices, meaning the purchasing power of their dollar is decreased. Knowing this, the IRS adjusts brackets in order to avoid bracket creep, a circumstance that occurs when inflation pushes your income into a higher tax bracket, or credits and deductions are reduced. In this scenario, an individual may not actually have increased purchasing power or greater disposable income, even with an increase in wages and salaries.2  

2020 Tax Brackets 

Without further ado, here are the 2020 tax brackets according to your filing status and income from the IRS1.

10% Tax Rate

  • Single Individuals: from $0 to $9,875
  • Married Individuals Filing Jointly: from $0 to $19,750
  • Heads of Households: from $0 to $14,100
  • Married Individuals Filing Separately: from $0 to $9,875

12% Tax Rate

  • Single Individuals: from $9,876 to $40,125 
  • Married Individuals Filing Jointly: from $19,751 to $80,250    
  • Heads of Households: from $14,101 to $53,700
  • Married Individuals Filing Separately: from $9,876 to $40,125

22% Tax Rate

  • Single Individuals: from $40,126 to $85,525    
  • Married Individuals Filing Jointly: from $80,251 to $171,050        
  • Heads of Households: from $53,701 to $85,500
  • Married Individuals Filing Separately: from $40,126 to $85,525

24% Tax Rate

  • Single Individuals: from $85,526 to $163,300        
  • Married Individuals Filing Jointly: from $171,051 to $326,600    
  • Heads of Households: from $85,501 to $163,300
  • Married Individuals Filing Separately: from $85,526 to $163,300

32% Tax Rate

  • Single Individuals: from $163,301 to $207,350    
  • Married Individuals Filing Jointly: from $326,601 to $414,700        
  • Heads of Households $163,301 to to $207,350
  • Married Individuals Filing Separately: from $163,301 to $207,350

35% Tax Rate

  • Single Individuals: $207,351 to $518,400
  • Married Individuals Filing Jointly: from $414,701 to $622,050
  • Heads of Households: from $207,351 to $518,400
  • Married Individuals Filing Separately: from $207,351 to $311,025

37% Tax Rate

  • Single Individuals: over $518,400    
  • Married Individuals Filing Jointly: over $622,050    
  • Heads of Households: over $518,400
  • Married Individuals Filing Separately: over $311,0251

In addition to the tax inflation adjustments, the IRS also altered standard deductions. While the above rates and brackets are at the federal level, different states might have varying brackets and rates. 

Similarly, capital gain tax rates did not change in 2020, but the brackets have also adjusted for inflation. Long-term capital gains {assets  held  for more than one year}:     

Filing Status    
 0% Rate      
 10% Rate  
  20% Rate
Single
$0 to $40,000
$40,001 to $441,450
Above $441,450
Married Filing Jointly
$0 to $80,000
$80,001 to $496,600
Above $496,600
Head of Household
$0 to $53,600
$53,601 to $469,050
Above $469,050
Married Filing Separately
$0 to $40,000
$40,001 to $248,300
Above $248,300

                                                                                                     

Short-term capital gains {asset is held for a year or less before it is sold}  are typically taxed as ordinary income. You can continue to deduct up to $3,000 of capital loss against ordinary income. Unfortunately, the $3,000 limit  has not been adjusted for inflation (in a really long time).

Financial TIP: A planning opportunity continues to exist: if your taxable income is below the marginal thresholds you have the opportunity to realize capital gains tax free (0% bracket) or at  rates substantial below your ordinary tax rates.   


  1. https://www.irs.gov/pub/irs-drop/rp-19-44.pdf
  2. https://www.aier.org/article/bracket-creep-a-real-problem-for-taxpayers/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.