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How the Tax Rates Affect the Money in Your Pocket

Tax Filing Tax Planning Tax Reform Taxes

The federal income tax rates for almost all taxpayers changed in 2018 due to tax reform. Some taxpayers’ rates will change more than others. Here’s how the new tax rates will affect you.

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How did the federal income tax rates change for 2019?

Most income tax bracket rates went down between 2-4 percent due to the Tax Cuts and Jobs Act. The lowest rate – 10 percent — didn’t change. Check out the 2019 tax rates below for single filers and those married filing joint returns.

2019 Tax Bracket for Single Filers

2019 Tax RateTaxable Income Level
10% Up to $9,700
12% $9,701-$39,475
22% $39,476-$84,200
24% $84,201-$160,725
32% $160,726-$204,100
35% $204,101-$510,300
37% Over $510,301

2019 Tax Bracket for Married Filing Jointly

2019 Tax RateTaxable Income Level
10% Up to $19,400
12% $19,401-$78,950
22% $78,951-$168,400
24% $168,401-$321,450
32% $321,451-$408,200
35% $408,201-$612,350
37% Over $612,351

Is all my income taxed at the rate that applies to my income level?

Not even close. A common misconception is that when your income reaches a bracket level, all your income is taxed at that rate. Fortunately, that is not true. Each portion of your taxable income is taxed at the applicable bracket rate. For example, if you were Single and made $10,000 in taxable income in 2019, you would pay a 10 percent rate on the first $9,700. You would only pay the 12 percent rate on $300 (the amount over $9,700).

To better understand how this works, check out the TaxAct Tax Bracket Calculator. Enter your filing status and taxable income. The calculator shows your tax bracket and your tax as a percent of income. For example, if you are married filing a joint return with a taxable income of $100,000, your tax bracket is 22 percent in 2019. The tax at that rate is only 13.88 percent of your taxable income, however. That’s because not all your income is taxed at your highest rate.

Keep in mind – the taxable income referred to in these tables is your income after all your adjustments and deductions.

Why is it useful to know my tax bracket rate if it doesn’t apply to my entire taxable income?

Your top tax bracket rate is the amount you pay on each additional dollar you earn. You can use that information to determine how much you get to keep if you earn another dollar, or how a deduction might help you. (Don’t forget to account for other taxes, such as Social Security, Medicare and state income taxes.)

If my new tax rate goes down, should my total tax bill be less, too?

Probably, yes. However, the new tax law changed more than just the tax rates. It also just about doubled the standard deduction, eliminated personal exemptions, added and expanded credits for dependents, changed the rules for deducting state and local taxes as well as mortgage interest. And that’s just to name a few of the changes. Your tax bill may go down, but some (mostly higher income) people may find they now pay more.

How do I change my withholding to account for the new tax rates?

If you are a traditional employee, you don’t need to change your income tax withholding just because of the new rates. The rates your employer uses to calculate your income tax withholding changed in February 2018 as a result of the adjustments to the tax brackets. You may have noticed a change in your paycheck then.

If you are self-employed, double check the amount of money you have designated for your quarterly estimated tax payments. You’ll want to make sure you’re setting aside enough to cover your bill.

Does that mean I don’t need to adjust my income tax withholding at all?

It’s always a good idea to estimate your taxes during the year to make sure you’re not hit by a big tax bill when you file your return. That’s true no matter if you’re a traditional employee or self-employed.

For the average taxpayer, it’s also important to not let the Internal Revenue Service keep your money if you’re overpaying. That extra money will come back in the form of a tax refund, but why let them hold onto it all year interest-free?

And that’s truer this year than ever with so many changes to the tax code. Your income could have changed along with your eligible deductions and other factors that affect your tax liability. Always check that your withholding is best aligned with your current life situation.

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