Taxes are dreaded by a lot of Americans as they see them as this burden that needs to be tended to or it will cause mayhem, but I don’t believe they should be viewed like this. I may sound like a college professor telling his students to don’t wait until the last minute to study for the big test, but the same concept applies for taxes.
Most Americans do not even know what tax bracket they fall under. I mentioned in the last article the taxes you have to pay as a couple, but even if you are married you have the option to pay for separate taxes filing separately.
IRS professionals strongly advise couples to file their taxes jointly as there are many benefits and tax returns you can obtain from this, but there are situations when it is better for married couples to file separately such as:
- When you or your spouse have a large amount of out of pocket medical expenses
- When both spouses work and earn approximately the same amount of money
- Filing separately also cuts the deductions for IRA contributions and eliminates child tax credits among other tax breaks
Filing separately may look similar to filing jointly but do not get the both of them combined. If you and your spouse earn separately less than $9,875 you have to pay ten percent of your taxable income.
Couples who separately earn between $9,876 and $40,125 have to pay $987.50 plus 12% of the amount over $9,875. The next tax bracket includes earnings between $40,126 and $85,525 which the amount to be paid is equal to $4,617.50 plus 22% of the amount over $40,125.
Going higher in the tax bracket, earning anywhere between $85,526 and $163,300 will lead you to pay $14,605.50 plus 24% of the amount over $85,525 in taxes. $163,301 to $207,350 is the next tax bracket which those who fall under this one has the pay the amount of $33,271.50 plus 32% of the amount over $163,300.
As you can tell the amount differentiating the tax brackets is much lower than in those where the married couple files jointly. If you and your spouse earn $207,351 to $311,025 separately you will have to pay $47,367.50 plus 35% of the amount over $207,350.
Finally, if your annual earnings is any amount above $311,026 the taxable income that you and your spouse has to pay is $83,653.75 plus 37% of the amount over $311,025. This is the final tax bracket for spouses filing separate tax reports.
Another type of tax bracket that you might fall under depending on your situation is head of household. As head of household you file as an individual and you must meet certain requirements such as:
- Be unmarried or considered unmarried at the end of the year
- Have paid more than half the cost of keeping up a home for the tax year
- Have a qualifying child or dependent
The tax bracket for head of household is as follows, if you earn below $14,100 dollars you get taxed 10% of your income. Following the first stage of the head of household income is for taxpayers who make anywhere between $14,101 and $53,700 who have to pay $1,410 plus 12% of the amount over $14,100.
As you can see the difference between the amount of money in each stage of the tax bracket is quite far apart if you compare them to the other three that I have mentioned in this and the last article.
A head of household who earns the amount of $53,701 to $85,500 has to pay $6,162 plus 22% of the amount over $53,700. If you earn anywhere between $85,501 and $163,300 then you have to pay $13,158 plus 24% of the amount over $85,500.
Following those amounts, taxpayers who make $163,301 to $207,350 have to pay $31,830 plus 32% of the amount over $163,300. The next column of the tax bracket is for Americans whose income is a number between $207,351 and $518,400. If you fall under this column then you have to pay $45,926 plus 35% of the amount over $207,350.
In the last column of the head of household bracket you will find that the last amount is $518,401 in order to calculate how much money you will have to pay if you are in this category, then you must add $154,793.50 plus 37% of the amount over $518,400.
It is important to take into consideration that if you are a head of household who is receiving financial assistance toward your expenses from a parent or third party you can still qualify for this bracket as long as you prove that you are paying for 50% of your bills with your own capital.
Divorced parents can still fall under this category if your child lived in your home for more than half of the year. You can still file under head of household if the other parent has the right to claim the child as a dependent.
Filing as a head of household or as a separate married couple has a lot of layers and can get quite complicated at times. Please feel free to send us a message and we will help you through this complicated process.
I hope you’ve found this article on the tax rate tables of 2020 to be helpful. For more information, or for assistance in tax matters contact us at firstname.lastname@example.org or call us at