President Donald Trump signed a law that dramatically overhauled the U.S. tax code in December 2017. The law created new income tax brackets that changed what many Americans pay in taxes. Most changes went into effect on Jan. 1, 2018 and so they didn’t affect your tax return until the 2018 tax year, which you filed in 2019. Let’s take a look at the 2021 tax brackets, and compare them with the 2020 and 2017 brackets to see how the Trump tax plan could have affected your tax return. And depending on these changes, you might want to work with a financial advisor to help formulate a tax strategy for your finances.
What Are the Trump Tax Brackets?
Many workers noticed changes to their paychecks starting in 2018, when the new tax rates went into effect. However, these new brackets, rates and general tax laws instituted by the Trump Administration will expire in 2025.
The chart below shows the tax brackets from the Trump tax plan. If you know your yearly income, you can figure out your tax bracket and see what your rate is for your 2021 taxes.
| 2021 Federal Income Tax Brackets | ||||
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | $0 – $9,875 | $0 – $19,750 | $0 – $9,875 | $0 – $14,100 |
| 12% | $9,876 – $40,125 | $19,751 – $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 | $171,051 – $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+ | $622,051+ | $311,026+ | $518,401+ |
Now, compare the 2021 tax brackets above with the 2020 brackets below. Note that the brackets were adjusted from year to year for inflation. And as a result, you might find yourself in a different tax bracket for 2021 than you did for 2020. This could also mean that you will pay a different tax rate on part of your income for your 2021 return.
| 2020 Federal Income Tax Brackets | ||||
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | $0 – $9,700 | $0 – 19,400 | $0 – $9,700 | $0 – $13,850 |
| 12% | $9,701 – $39,475 | $19,401 – $78,950 | $9,701 – $39,475 | $13,851 – $52,850 |
| 22% | $39,476 – $84,200 | $78,951 – $168,400 | $39,476 – $84,200 | $52,851 – $84,200 |
| 24% | $84,201 – $160,725 | $168,401 – $321,450 | $84,201 – $160,725 | $84,201 – $160,700 |
| 32% | $160,726 – $204,100 | $321,451 – $408,200 | $160,726 – $204,100 | $160,701 – $204,100 |
| 35% | $204,101 – $510,300 | $408,201 – $612,350 | $204,101 – $306,175 | $204,101 – $510,300 |
| 37% | $510,301+ | $612,351+ | $306,176+ | $510,301+ |
And for another comparison, the chart below shows the tax brackets for 2017. If you know your yearly income, you can see how the new plan changed your tax rate from before. Here’s a breakdown:
| 2017 Federal Income Tax Brackets (Pre-Trump Tax Laws) | ||||
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
| 10% | $0 – $9,325 | $0 – 18,650 | $0 – $9,325 | $0 – $13,350 |
| 15% | $9,326 – $37,950 | $18,651 – $75,900 | $9,326 – $37,950 | $13,351 – $50,800 |
| 25% | $37,951 – $91,900 | $75,901 – $153,100 | $37,951 – $76,550 | $50,801 – $131,200 |
| 28% | $91,901 – $191,650 | $153,101 – $233,350 | $76,551 – $116,675 | $131,301 – $212,500 |
| 33% | $191,651 – $416,700 | $233,351 – $416,700 | $116,676 – $208,350 | $212,501 – $416,700 |
| 35% | $416,701 – $418,400 | $416,701 – $470,700 | $208,351 – $235,350 | $416,701 – $444,550 |
| 39.6% | $418,401+ | $470,701+ | $235,351+ | $444,551+ |
How Did the Tax Brackets Change?
The biggest changes under the new Trump tax plan came for those in the middle of the chart. A married couple whose total income minus deductions is $250,000 would have had a 33% tax rate in 2017. For 2018, 2019 and beyond, their highest tax rate is just 24%. That led to a fairly significant difference in take-home pay.
Those who earn less may also see a bit of a break. A single person making $39,000 in taxable income in 2017 saw a rate of 25%. In 2018, 2019 and beyond, that rate drops to 12%.
You also get a tax break if you’re among the country’s highest earners. The highest tax bracket used to carry a 39.6% rate and apply to single people earning more than $418,401 and married couples, filing jointly, who earned more than $470,701 in taxable income. Now the highest rate, which is just 37%, kicks in at $518,401 for single people and $622,051 for joint filers.
Other notable Trump tax overhaul changes include:
- Doubled the standard deduction from $12,700 (2017) to $25,100 (2021) for married couples filing jointly, and from $6,350 (2017) to $12,550 (2021) for single taxpayers and married individuals filing separately, and from $9,350 (2017) to $18,800 (2021) for heads of households; while eliminating personal exemptions (in 2017 you could claim a $4,050 deduction for yourself and each qualifying dependent in your household).
- A lower threshold for qualified medical expenses. Those that exceed 7.5% of your AGI are deductible. In 2017, taxpayers under 65 could only deduct expenses that exceed 10% of their AGI. But, if your total itemized deductions don’t exceed Trump’s higher standard deduction, you won’t be able to take it.
- Doubled the maximum child tax credit to $2,000 for each qualifying child younger than 17 years old, and made it available to higher income households – IRS says it now begins to “phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly.”
- Doubled the estate and gift tax exemption from $5.49 million in 2017 to now $11.7 million in 2021, which refers to the maximum amount you can give in lifetime gifts and bequests at death without having to pay a 40% tax.
Individual tax provisions are going to expire after 2025. So when you file in 2026, rates will go back to those before Trump’s 2018 changes.
How Tax Rates Work
Remember that the tax rates are marginal. The tax rate of your total income applies only to the income earned in that bracket. For instance, if your taxable income is $300,000 in 2020, only the income you earn past $207,351 will be taxed at the rate of 35% shown on the corresponding federal income tax chart above. The lower rates apply to income in the corresponding brackets.
This is important to consider when thinking about deductions and figuring out your taxable income. Just because your total income reaches a new tax bracket, doesn’t mean all your money is taxed at that rate. In fact, it only applies to anything above the threshold for the new bracket.
Bottom Line
According to the National Taxpayer Advocate (NTA), 2020 refunds averaged $2,827. This is a marked decline from the previous year. While Americans are getting tax cuts, depending on individual taxpayer circumstances, the Joint Committee on Taxation and the Congressional Budget Office said in 2017 that Trump’s tax plan could add over $1 trillion to the national debt by 2027.
Trump’s tax plan was one of the largest tax code overhauls in decades – lowering individual tax rates, raising standard deductions, and lowering the threshold for medical expense deductions, among other changes. It didn’t affect taxpayers until the 2018 tax year, and many of the benefits will expire by 2025.
Keep in mind that tax brackets change for inflation each year. As a result, this could put you in a different tax bracket from one year to the next. That means that you might also have to pay a different tax rate for part of your income. If you’re wondering how the tax changes affect your specific tax situation, use SmartAsset’s income tax calculator. It will help you see what you can expect to pay under the new plan.
Tax Season Tips
- Minimize your taxes by working with a financial advisor who offers tax planning. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Figure out how to file your taxes early. If you’re a young adult paying taxes on your own for the first time this is especially important. It can’t hurt to brush up on the mechanics of getting through this yearly ritual either way, though. You can also expedite the process by using an electronic filing service. TurboTax is one of the most popular tax-filing services and it consistently gets high ratings on usability and customer support.
- See if you’ll be getting a refund or if you’re likely to have to send a check to the government using SmartAsset’s tax return calculator. This can be useful for your household budget. Plus, it helps you know what to expect when you go through with actually filing.
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