2021 Federal Tax Brackets

What changed in 2021

2021 was year 4 of the TCJA 7-bracket structure with thresholds inflation-indexed about 1.0% over 2020 - the smallest adjustment of the TCJA era, reflecting still-low pre-pandemic inflation in the August 2019 to August 2020 measurement window. The standard deduction rose to $12,550 single / $25,100 MFJ ($150 / $300 above 2020). The 37% bracket began at $523,600 single / $628,300 MFJ. For a single filer with $75,000 taxable income, 2021 federal income tax was approximately $9,250, an effective rate of 12.33%. The legislative story of 2021 was the American Rescue Plan Act (March 2021), which delivered the most aggressive temporary individual tax expansion since CARES. The Child Tax Credit jumped to $3,000-$3,600 per child (depending on age), became fully refundable, and was paid in advance monthly from July through December. The EITC was expanded for childless workers under 25 and over 65. The first $10,200 of 2020 unemployment compensation was retroactively made non-taxable, requiring many 2020 returns to be amended. The third round of Economic Impact Payments ($1,400 per person plus eligible dependents) was reconciled on the 2021 return as the Recovery Rebate Credit.