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Going into 2011, it was thought that the federal income tax brackets and marginal tax rates were going to change drastically because of the Bush-era tax cuts expiring.
However, they were extended for another two years, so the tax brackets and marginal rates aren’t going to change very much going from 2010 to 2011.
Here we’re going to take a look at each of the Federal Income Tax brackets and marginal tax rates for both single taxpayers and married couples filing jointly, and take a look at what is changing going into 2011.
Note: click here for the 2012 Federal Income Tax Brackets and Marginal Rates.
The lowest marginal tax rate is the 10% bracket.
The range of income covered by this bracket in 2010 was $0 to $8,375, but going into 2011, the upper limit is changed to $8,500.  Similarly, the married couples filing jointly will see a raise from $0-$16,750 to $0-$17,000.  These aren’t very big changes, and won’t change tax amounts for many people by a large amount at all.
The 15% marginal rate is seeing some small adjustments as well.
In 2010, the 15% bracket covered income from $8,375 to $34,000 for individuals, and $16,750 to $68,000 for couples filing jointly.  For 2011, there are small changes which bump the tax brackets to $8,500 to $34,500 for individuals, and $17,000 to $69,000 for joint returns.  These changes will affect a lot of families, and although they aren’t huge changes, they’re close to keeping up with inflation.
For the 25% marginal tax rate in 2011, individuals will have a bracket of $34,000 to $83,600, and couples will have a bracket of $69,000 to $139,500.
Compare this to 2010, where in the 25% bracket, individuals had a bracket of $34,000 to $82,400, and couples had a bracket of $68,000 to $137,300.  Again, these are mostly small changes geared towards helping to keep up with inflation.
Moving on up, there’s the 28% rate.
In 2011, this bracket will be from $83,600 to $174,400 for individuals, and $139,500 to $212,300 for couples filing a joint tax return.  This is a more noticeable change over 2010 levels, where the 28% bracket was $82,400 to $171,850 for individuals and $137,300 to $209,250 for couples filing jointly.
The 33% tax rate was $171,850 to $373,650 for individuals in 2010, but has been bumped to $174,400 to $379,150 for 2011.
The 33% tax bracket for married couples filing jointly also saw a marked increase from $209,250 to $373,650 in 2010 up to $212,300 to $379,150 in 2011.  The changes are much more noticeable in the higher brackets.
Finally, there are the 35% tax rate brackets which only have a minimum for an income range but no maximum.
In 2010, the single and joint 35% brackets were both $373,650 and up.  For 2011, that’s been increased to a minimum of $379,150 for the 35% bracket, for a difference of $5,500.
Something to understand about the marginal tax rate:
A lot of people don’t fully understand what is meant by the “marginal tax rate.”  They don’t want to be in a higher rate because they think their entire income will get taxed at the higher rate.
But that’s not quite how it works.
When your income bumps you up to the next bracket you do pay a higher tax.  But you only pay the higher percentage for the income amount that falls in that bracket.
The income up to, but not including the next highest bracket, is taxed at the lower brackets marginal tax rate.
Say you are single and your taxable income for the year was $8,000.
That puts you in the 10% marginal tax rate (the bracket is $0-$8,5000).  So you are taxed 10% on that income.
Easy so far, right?
Now let’s imagine you made $9,000 in taxable income for the year instead.
Your taxable income of $9,000 is in the next marginal tax rate up which is 15%.
But check this out — only $500 is taxed at 15%.  The first $8,500 of your income is taxed at the lower marginal tax rate of 10%.
When you move up a marginal tax rate, only that portion of your income that falls into the higher Federal Income Tax bracket is taxed at the higher rate.
Of course this is a simplified example.  I’m not including any deductions, credit, or exemptions that would lower your taxable income.  But I think you get the picture.
When you move up a tax bracket it’s not as bad as you may have thought.
Here’s a chart to summarize the 2011 Federal Income Tax Brackets and Marginal Rates:
2011 Federal Income Tax Brackets and Marginal Tax Rates
Resource: The Tax Foundation – U.S. Federal Individual Income Tax Rates History, 1913-2011
Filed Under: Taxes Tagged With: federal income tax rates, marginal tax rates
Glen Craig is married and the father to four children that he spends the day chasing as a stay-at-home-dad. He took an interest in personal finance when he realized most of his paycheck was going toward credit card bills. Since then he's eliminated his credit card debt and started on a journey towards financial freedom.
John @ The Best Money Blog says
January 13, 2011 at 12:20 pm
I knew I got married for a reason. 😉
January 13, 2011 at 9:00 pm
January 13, 2011 at 7:18 pm
I working at achieving the highest taxable bracket! I know that sounds crazy, but I will find the deductions to lower it once I get there. If anyone would like to help me get there feel free to respond, support or donate. I know I am kidding, however I really do want to be in the highest income tax bracket!
January 13, 2011 at 9:01 pm
For all the taxes I’d still like to be in the highest bracket too!
John @ The Best Money Blog says
January 14, 2011 at 12:46 pm
Thought I’d chime again after receiving my first full 2011 paycheck and doing my taxes last night. I learned 2 things:
1. I make $50 net more per week now thanks to the payroll tax change.
2. I need to adjust my withholding! I have more than $5,000 coming back to me, lol.
January 14, 2011 at 8:53 pm
Yes, my wife got a nice “raise” on her latest paycheck too.
January 17, 2011 at 3:20 pm
Thanks for the post reviewing federal income tax brackets. I think some people were expecting some significant changes.
September 21, 2011 at 10:59 am
Whew knowing these brackets ahead of time helps so much. I am well within reach to adjust my 401k so that I land in the 25% tax bracket rather than the 28%.
Good thing I looked them up!
September 21, 2011 at 12:03 pm
Sounds like some smart planning Curt!
December 12, 2011 at 3:32 pm
Just to clarify, we are talking about Taxable Income, not Adjusted Gross Income, right?
January 28, 2012 at 5:39 pm
“Say you are single and your income for the year was $8,000.
That puts you in the 10% marginal tax rate (the bracket is $0-$8,5000).”
No, it doesn’t man that at all. This is a poorly written article. The author means to say that if your TAXABLE INCOME is $8,000, you would owe 10% or that amount, minus any credits. Taxable income and your total income are not the same thing. In reality, if you made $800o, you would not only not owe any tax, but you would receive money from the gov’t through the EIC or other credits.
January 29, 2012 at 1:29 pm
Ouch, but you are correct Ben. What I meant to say was “taxable” income. I was trying to get the point across of how marginal rates worked and forgot that little, yet important, part.
Thanks for pointing it out. I’m correcting the text.
January 29, 2012 at 2:35 pm
Sorry for being harsh. Other than that, it’s a good article.
January 29, 2012 at 7:44 pm
Not a problem. You called out an important distinction and helped make the article better for everyone that reads it after you.
A Little About Me
I'm Glen Craig - I used to live paycheck-to-paycheck, drowning in credit card debt. I turned that all around and now I build wealth rather than debt.
My goal is to make personal finance easy for you.
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