Income in the form of dividends and long-term capital gains (those realized on assets held for more than a year) is taxed under a separate rate schedule, with a maximum statutory rate of 20 percent. Statutory Tax Rate on Ordinary Taxable Income (Percent) Starting Points for Tax Brackets (2018 dollars) Like the tax rates, the tax brackets will revert to those in effect under pre-2018 law (adjusted for inflation using the chained CPI-U) in 2026. The 2017 tax act permanently changed the measure used to adjust for inflation from the consumer price index for all urban consumers (CPI-U) to a "chained" version of the CPI-U, which grows more slowly. The starting points for those income ranges are adjusted, or indexed, each year to include the effects of inflation. For 2018, for example, a person filing singly with taxable income of $40,000 would pay a tax rate of 10 percent on the first $9,525 of taxable income, 12 percent on the next $29,175, and 22 percent on the remaining $1,300. Tax brackets-the income ranges to which the different rates apply-vary depending on taxpayers' filing status (see table below). Beginning in 2026, the statutory rates will be 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent.Īs specified by the tax code, different statutory tax rates apply to different portions of people's taxable ordinary income. (Taxable ordinary income is all income subject to the individual income tax other than most long-term capital gains and dividends, minus allowable adjustments, exemptions, and deductions.) At the end of 2025, nearly all of the modifications to the individual income tax system made by the 2017 tax act are scheduled to expire, and the rates will revert to those under pre-2018 tax law. For calendar years 2018 through 2025, taxable ordinary income earned by most individuals is subject to the following seven statutory rates: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The 2017 tax act included a number of temporary changes to the individual income tax.
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