The IRS on Monday released the updated tax brackets for the 2021 filing season, which have been modified to reflect inflation.
Taxpayers fall into one of seven brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. While those rates will remain unchanged in 2021, the tax brackets have been indexed to keep pace with cost-of-living adjustments.
These rates are in effect for 2021 and will be used to prepare your tax returns in 2022. You can find the tax brackets for 2020 here.
The IRS has also increased the standard deduction — a flat dollar amount that reduces the amount of your income that’s subject to taxes — for 2021. For individuals and married couples filing separately, the deduction rose to $12,550, up $150 from this year. For married couples filing jointly, the deduction jumped to $25,100, an increase of $300.
Heads of households will also see an increase in their standard deduction next year: $18,800, up $150 from this year.