New 2021 Tax Brackets, and How WMGNA Could Lower your Rate!

Daniel J. Friedman

“It’s beginning to look a lot like tax time…”  is playing on an endless loop around here this time of year.  So many of us get stuck in a rut with our taxes:

  • Collect my tax forms 1099’s-W2’s-K-1’s ugh…email? Snail mail? Where is everything
  • Get a 23-page tax organizer from CPA!
  • Send in tax organizer to CPA.
  • Pay a ton in taxes

At WMGNA, we have a saying,

“Your taxes affect everything you do, and everything you do affects your taxes.”

Taxes are an immutable fact of life and an area overlooked by most financial advisors and even CPA’s.  Our monthly subscription service in concert with the proactive CPA’s we work with provides our clients a 360◦ view of their entire financial situation, armed with this information we can reveal immediate and ongoing tax and financial savings.  So…de-stressing and lowering your taxes is very possible when you have a Tax-out subscription with WMGNA.

If saving thousands in taxes and other expenses for 2021 sounds like something you would like to do, contact us!

And now... here is the rest of the story:

Reminder: 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 are a single filer who made $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

With the onset of COVID-19 and the resulting economic downturn, millions of Americans lost their jobs and business owners were forced to cease operation for months at a time. If your income was impacted by the financial hardships caused by COVID-19, you may fall into a different tax bracket this filing season as well.

2020 Tax Brackets 

Without further ado, here are the 2020 tax brackets according to your filing status and income from the IRS.1

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 $311,025

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. 

  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.

By Daniel J. Friedman
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