How to get into a lower tax bracket and pay a lower federal income tax rate
Two common ways of reducing your tax bill are credits and deductions.
- Tax credits directly reduce the amount of tax you owe; they don't affect what bracket you're in.
- Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction could save you $220.
In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate.
Single Filer
| Tax Rate | Taxable income bracket | Tax owed |
|---|
| 10% | $0 to $9,950 | 10% of taxable income |
| 12% | $9,951 to $40,525 | $995 plus 12% of the amount over $9,950 |
| 22% | $40,526 to $86,375 | $4,664 plus 22% of the amount over $40,525 |
| 24% | $86,376 to $164,925 | $14,751 plus 24% of the amount over $86,375 |
| 32% | $164,926 to $209,425 | $33,603 plus 32% of the amount over $164,925 |
| 35% | $209,426 to $523,600 | $47,843 plus 35% of the amount over $209,425 |
| 37% | $523,601 or more | $157,804.25 plus 37% of the amount over $523,600 |
Married Filing Jointly
| Tax Rate | Taxable income bracket | Tax owed |
|---|
| 10% | $0 to $19,900 | 10% of taxable income |
| 12% | $19,901 to $81,050 | $1,990 plus 12% of the amount over $19,900 |
| 22% | $81,051 to $172,750 | $9,328 plus 22% of the amount over $81,050 |
| 24% | $172,751 to $329,850 | $29,502 plus 24% of the amount over $172,750 |
| 32% | $329,851 to $418,850 | $67,206 plus 32% of the amount over $329,850 |
| 35% | $418,851 to $628,300 | $95,686 plus 35% of the amount over $418,850 |
| 37% | $628,301 or more | $168,993.50 plus 37% of the amount over $628,300 |
Married Filing Separately
| Tax Rate | Taxable income bracket | Tax owed |
|---|
| 10% | $0 to $9,950 | 10% of taxable income |
| 12% | $9,951 to $40,525 | $995 plus 12% of the amount over $9,950 |
| 22% | $40,526 to $86,375 | $4,664 plus 22% of the amount over $40,525 |
| 24% | $86,376 to $164,925 | $14,751 plus 24% of the amount over $86,375 |
| 32% | $164,926 to $209,425 | $33,603 plus 32% of the amount over $164,925 |
| 35% | $209,426 to $314,150 | $47,843 plus 35% of the amount over $209,425 |
| 37% | $314,151 or more | $84,496.75 plus 37% of the amount over $314,150 |
Head of Household
| Tax Rate | Taxable income bracket | Tax owed |
|---|
| 10% | $0 to $14,200 | 10% of taxable income |
| 12% | $14,201 to $54,200 | $1,420 plus 12% of the amount over $14,200 |
| 22% | $54,201 to $86,350 | $6,220 plus 22% of the amount over $54,200 |
| 24% | $86,351 to $164,900 | $13,293 plus 24% of the amount over $86,350 |
| 32% | $164,901 to $209,400 | $32,145 plus 32% of the amount over $164,900 |
| 35% | $209,401 to $523,600 | $46,385 plus 35% of the amount over $209,400 |
| 37% | $523,601 or more | $156,355 plus 37% of the amount over $523,600 |