President Donald Trump signed a law that dramatically overhauled the U.S. tax code in December 2017. The law created new income tax brackets and resulted in changes to 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 how the tax changes could have affected you.
The Trump Tax Brackets
Many workers noticed changes to their paychecks starting in 2018, when the new tax rates went into effect. The chart below shows the tax brackets from the Republican tax plan. If you know your yearly income, you can figure out your tax bracket and see what your rate is for your 2019 and 2020 taxes.
Federal Income Tax Bracket for 2019 (new filing deadline: July 15, 2020)
| Single | Married Filing Jointly | |
| 10% | $0 – $9,700 | $0 – 19,400 |
| 12% | $9,701 – $39,475 | $19,400 – $78,950 |
| 22% | $39,476 – $84,200 | $78,951 – $168,400 |
| 24% | $84,201 – $160,725 | $168,401 – $321,450 |
| 32% | $160,726 – $204,100 | $321,451 – $408,200 |
| 35% | $204,101 – $510,300 | $408,201 – $612,350 |
| 37% | $510,301+ | $612,351+ |
Federal Income Tax Bracket for 2020 (filed in April 2021)
| Single | Married Filing Jointly | |
| 10% | $0 – $9,875 | $0 – $19,750 |
| 12% | $9,876 – $40,125 | $19,751 – $80,250 |
| 22% | $40,126 – $85,525 | $80,251 – $171,050 |
| 24% | $85,526 – $163,300 | $171,051 – $326,600 |
| 32% | $163,301 – $207,350 | $326,601 – $414,700 |
| 35% | $207,351 – $518,400 | $414,701 – $622,050 |
| 37% | $518,401+ | $622,051+ |
For reference, this chart below shows the tax brackets for 2017. If you find your income in both charts, you can see how the new plan changed your tax rate.
| TAX YEAR 2017 FEDERAL INCOME TAX BRACKETS | ||
| Single Filers | Married Filing Jointly | Tax Rate |
| $0 – $9,325 | $0 – $18,650 | 10% |
| $9,326 – $37,950 | $18,651 – $75,900 | 15% |
| $37,951 – $91,900 | $75,901 – $153,100 | 25% |
| $91,901 – $191,650 | $153,101 – $233,350 | 28% |
| $191,651 – $416,700 | $233,351 – $416,700 | 33% |
| $416,701 – $418,400 | $416,701 – $470,700 | 35% |
| $418,401+ | $470,701+ | 39.6% |
How Did the Tax Brackets Change?
As you can see, 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, for instance, would have had a tax rate of up to 33% 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 got a tax cut if you were or are 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 married couples.
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 2019, only the income you earn past $207,351 will be taxed at the rate of 35% shown on the 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 is pushing into a new tax bracket, that doesn’t mean all of your money is taxed at that rate – just anything above the threshold for the new bracket.
The Bottom Line
As noted above, the new Trump tax brackets didn’t apply until the 2018 tax year. For years after 2018, the brackets will stay the same but the income thresholds will change slightly to keep up with inflation. If you’re wondering how the tax changes affect your specific tax situation, use SmartAsset’s income tax calculator to see what you can expect to pay under the new plan.
Tax Season Tips
- 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.
- Minimize your taxes by working with a financial advisor who offers tax planning. Our financial advisor matching tool can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to up to three registered investment advisors who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
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