Every year, the IRS adjusts more than 40 tax provisions for inflation and changes on the cost of living in the United States. This includes well to the tax brackets each taxpayer fill in to prevent something called ”bracket creep” which is when people are pushed into tax brackets with higher tax rates or have reduced value from deductions and credits due to inflation instead of any increase in real income.
Before the Tax Cuts and Jobs Act of 2017, the IRS used the Consumer Price Index to calculate the past year’s inflation but this has changed with the new law, making the IRS use Chained Consumer Price Index (C-CPI) to adjust deductions, credit values, and income thresholds.
| Tax Rate | Single | Married – Joint Filers | Married – Separately | Head of Household |
| 10% | $0 – $9,875 | $0-$19,750 | $0-$9,875 | $0 – $14,100 |
| 12% | $9,876 – $40,125 | $19,8-751 – $80,250 | $9,876 – $40,125 | $14,101 – $53,700 |
| 22% | $40,126 – $85,525 | $80,251 – $171,050 | $40,126 – $85,525 | $53,701 – $85,500 |
| 24% | $85,526 – $163,300 | $171,050 – $326,600 | $85,526 – $163,300 | $85,501 – $163,300 |
| 32% | $163,301 – $207,350 | $326,601 – $414,700 | $163,301 – $207,350 | $163,301 – $207,350 |
| 35% | $207,351 – $518,400 | $414,701 – $622,050 | $207,351 – $311,025 | $207,351 – $518,400 |
| 37% | $518,401 and higher | $622,050 and higher | $311,026 and higher | $518,401 and higher |
If you’re confused about how the tax brackets work, think of this way; let’s assume your income is $100,000 for 2019. This would place you in the 24% bracket but instead of thinking it as a whole, think of the brackets as pockets where you need to fill in each.
So you have to pay 10% of $9,700, 12% of $39,475, 22% $84,200, and lastly 24% of $15,800 which is the amount that goes over $84,200 up to your income.
This should give you an idea of why the tax brackets you fall into don’t just take up a certain percentage of your income.
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