Federal Income Tax Brackets Updated With the New 2018 Federal Tax Laws

The new income tax brackets reduce the tax rate for most income tax filers

Federal Income Tax Brackets Updated With the New 2018 Federal Tax Laws
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April 4, 2018

As if the federal and state income tax system isn't complicated enough, 2018 brought some changes to the tax laws that affect how much taxpayers will pay on their federal income taxes beginning with the 2018 tax year. These changes are due to the Tax Jobs and Cuts Act of 2017 and will be used to file your 2018 federal income tax return, not your 2017 return.

New Federal Income Tax Brackets for 2018

The rates for federal income taxes are divided into seven brackets based on taxpayer income. These brackets range from 10 percent to 37 percent and where you fall depends upon your Adjusted Gross Income (AGI) and your filing status. The filing statuses are:

  • Single: applies only to unmarried taxpayers
  • Married filing jointly: married couples who are combining their income on a single tax return
  • Married filing separately: married couples who are each filing their own return
  • Head of household: for individual taxpayers who are considered single for filing purposes, provide more than half of the support for a child, and are able to claim that child as an exemption

Breaking Down the Federal Income Tax Brackets

Every tax bracket includes two amounts: a base amount and a ceiling amount. If your income falls anywhere between those two amounts, it is taxed at that bracket's rate. For the purposes of our chart, we are only including the ceiling amount for each bracket.

When taxpayers say they are in the 10% tax bracket, they are talking about the marginal tax rate. The marginal tax rate is based upon a taxpayer's last dollar of income. When you figure your AGI, this amount determines your marginal tax rate or tax bracket. This is why tax deductions are important because they can lower your AGI from one tax bracket to another.

Basic 2018 Federal Income Tax Brackets

Rate Single Married Jointly Married Separate Head of Household
10 % $9,525 $19,050 $9,525 $13,600
12 % $38,700 $77,400 $38,700 $51,800
22 % $82,500 $165,000 $82,500 $82,500
24 % $157,500 $315,000 $157,500 $157,500
32 % $200,000 $400,000 $200,000 $200,000
35 % $500,000 $600,000 $300,000 $500,000
37 % $500,001 + $600,001 + $300,001 + $500,001 +

But My Tax Rate Is Lower Than The Marginal Tax Rate or Bracket

The total amount of tax you will pay will always be lower than the tax rate in your tax bracket. Income is taxed at different rates throughout the entire taxing process. For example, if you have $35,000 of AGI, you will be taxed at 10% for the first $9,525 of income and taxed at 12% for the remaining $25,475. So your total tax paid or the effective tax rate is about 11.46%.

The higher your income, the more tax brackets that apply to you and the higher your tax rate.

Tax Brackets Don't Determine Your Tax Bill

Although it is good to know both your marginal and effective tax rates, these do not determine the final size of your tax bill. The actual amount of taxes you owe can only be determined by filling out a tax return, which takes into account all deductions, exemptions, and eligible credits.

Changes to Standard Deductions

Standard deductions have increased to $12,000 for individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly.

Many Other Changes

There are a number of other changes to the tax rules that were due to this new tax law, which are quite numerous. You can find full details on the changes to the tax rules from the IRS website.