Which Tax Bracket Will You Fall Into in 2021?

Writer: Steve Dinnen

Tax officials in Iowa and Washington have recently updated the indexes that will be used in 2021 to determine the income tax brackets we fall into. They show a slight uptick from 2020’s bracket levels.

The bracket calculation, along with deduction allowances for filing status (single, or married filing jointly, separately, etc.) and the personal exemption allowance, is adjusted every year to allow for inflation. The practice debuted in 1981 at the federal level, and gradually has spread to most states. Iowa adjusts for the brackets, of which it has nine, and for the standard deduction, but not for the personal exemption.

At the federal level – it has seven brackets – the lowest bracket of 10% applies to taxable income below $9,950 single, or $19,900 married filing jointly. This year the lowest brackets are below $9,875 single/$19,550 married filing jointly.

Iowa’s lowest rate for 2021 is 0.33%, for income below $1,676. This year’s lowest rate applies to taxable income below $1,666.

The two highest federal rates, 35% and 37%, edge up next year to $209,475/$418,850, and $523,600/$628,300. Iowa’s top rate of 8.53% (seventh-highest in the nation, for what it’s worth) starts at $75,420 next year. It is $74,970 this year.

You May Also Like

Iowa now has just three income-tax brackets

By Steve Dinnen Iowa has accelerated its march toward a flat income tax rate. ...

Defining, and Aspiring to Attain, the Threshold of …

BY STEVE DINNEN Where does wealthy start? Try $2.3 million, according to those quizzed ...

Drake Dean: How Gen Z Should Manage Their Money

Alejandro Hernandez, dean of Drake University’s College of Business and Public Administration. Writer: Steve ...