2010 Tax Brackets – Federal

Here are the new 2010 federal income tax brackets, as formatted for my own future reference. Due to low inflation, they only differ very slightly from the 2009 tax brackets. These tables are based on taxable income, which is not the same as the gross income on your paystub or the adjusted gross income (AGI) listed on your tax return. Taxable income is after taking any deductions and other exemptions you are eligible for.

Marginal Tax Rate [Taxable Income] Single Married Filing Jointly
10% $0-$8,375 $0-$16,750
15% $8,375-$34,000 $16,750 -$68,000
25% $34,000-$82,400 $68,000-$$137,300
28% $82,400-$171,850 $137,300-$209,250
33% $171,850-$373,650 $209,250-$373,650
35% > $373,650 > $373,650

The value of each personal exemption stays the same as 2009, at $3,650. The standard deduction also remains $11,400 for married couples filing a joint return and $5,700 for singles and married individuals filing separately. Heads of household get slight $50 bump up to $8,400.

Since we’re married, I always pay attention to the point where you jump from 15% to the 25% bracket, which this year is $68,000. If you assume we only take the two personal exemptions and a standard deduction, this would work backwards into a gross income of $86,700.

More info: IRS.gov

Comments

  1. I every time I look at tax tables I end up grumbling and annoyed. But then again, we should realize that the rates today and uniquely low.

    http://www.truthandpolitics.org/top-rates.php

    As recently in the 70s and early 80s the top tax rates we WAY higher than they are today. What worries me is that tax rates at retirement will be higher than today, even if my income goes down. I guess that is where Roth 401ks etc come in, but I am not convinced that some populist politician down the road wouldn’t see an opportunity to tax those rich retirees with Roth accounts.

  2. Don’t forget your 401k contribution when figuring your tax bracket. If you are married and max out both you can actually make $119,700 (86,700 + 16,500 + 16,500).

  3. “…a gross income of $86,700. ”

    Not sure I understand your interest in this number. Don’t you both make six figures?

  4. @Rick – Not when I “retire”. As long as I think I can keep my taxable income below this general benchmark, then I should technically keep on making pre-tax contributions (thus avoiding a 25+% tax rate) and simply pay tax when I make withdrawals in retirement (and paying a max of 15% tax).

  5. so you are putting away so much money in pre-tax investments that you can get a $200,00+ income to look like an $86,000 income? i know you max out your Roths and 401ks- but wow, my brain can’t get me there.

    i love your site – it fascinates me. we have 3 kids and i stay home, we live in an affordable house in chicagoland – so our situations are very different, but i’m still able to learn a lot from your blog. thank you for your careful explanations and good ideas! keep em coming!

  6. Kate,

    I think Jonathan is talking about his income after he has retired. So the choice for him is to pay tax now based on his current income by investing in Roth IRA or Roth 401k, or pay tax after retirement by investing in tax-deferred accounts.

  7. Kate,

    I think Jonathan is talking about his income after he has retired. So the choice for him is to pay tax now based on his current income by investing in a Roth IRA or Roth 401k, or pay tax after retirement by investing in tax-deferred accounts.

    But there’s some uncertainty w/r/t future tax brackets. Today’s 15% tax bracket may be a much higher bracket by the time Jonathan retires.

  8. Don’t forget the only dollars that are taxed at 25% are the dollars above $68,000. So if you make a little more, it is not like the tax man is going to show up and tax everything at 25%.

  9. As parents of 9 children, we’re more interested in staying in the 10% bracket. Kids sure help with that! If I understand correctly, we can make $51,550 before we get bumped to the next bracket. Don’t worry – we make up for the income taxes we don’t have to pay with the gas tax eaten up by our 15 passenger van.
    Some say that while kids may reduce income tax in the short run, they’re not a good longterm investment. I say they’re forgetting to count the dividends. :)

  10. I bet that 80% or more of the population don’t understand something as basic marginal and actual tax rates. It’s no wonder so many people get duped into bad investments and buying gold (on credit).

  11. free_thinker says:

    Dave,

    Will you clarify what you mean? Its my understanding that once you jump brackets you are now fully taxed at the next rate, that just the portion over? Am I missing something can somebody else chime in?

  12. David (different one) says:

    Free thinker- Dave is correct. As a simple example, lets say you are single and made only 15,000. 8375 would be taxed at 10%. Thus only 6625 would be taxed at 15%. It continues like that as you work your way higher. Thus there should be no panic to reduce your income…if you go over by $1000, then only that $1000 will be at a higher rate.
    I don’t see why our government rewards people for having 9 kids. This planet is plenty populated enough without incentives to procreate. Plus since gas is artificially way underpriced too (environmental costs are ignored), you are being subsidized for driving around a 15 seat van everywhere you go as well.

  13. @Jake, I don’t think the Roth accounts will get taxed. However, politicians could lower the income tax and start charging national sales tax instead. This will encourage people to work (after the baby boomers retire and leave a big gap), make all consumers (even retirees) pay taxes, and effectively remove the Roth advantage. However, it is also possible that even if a sales (or other similar tax) were introduced, income taxes would still go up, so those with Roths would still be better off.

    Some like to diversify–have some money in a Roth and some in other accounts. This gives you some advantages of reducing taxes now and the money that is taxed later is reduced, possibly even greatly reducing your marginal tax.

  14. To David(different one):

    I think income-earning/taxpaying Americans are given incentives to have kids becuase income-earning/taxpaying Americans are a huge benefit to our country, and there needs to be more of us.

    I came from a family of 8 kids. My wife came from a family of 7 kids. We currently have 3 kids, but we don’t plan on stopping.

    All 15 of the kids from my family and my wife’s family all are/or will be college graduates (3 are currently attending/applying). Of the 11/15 that are married, 10 of the in-laws are college graduates (the other is a multi-millionaire, don’t ask!).

    Anyway, we are reproducing like bunnies, and you can bet that we expect our kids to be productive individuals in society who donate, volunteer, hold jobs, graduate from college, etc. (from the 15, about 50 kids and counting between all of us)

    Although the tax credit probably had little to do with all this, (perhaps, rather, we all lack a fundamental understanding of birth control) I think Uncle Sam has a vested interest in rewarding this kind of behavior. I don’t think our story is too unique.

    (p.s., We’re all very active christians, as you might have guessed. Hope that does send a chill down the spine of anyone reading this!)

  15. @Jonathan,
    you really thing the tax rate will be 15 % for $16,750 -$68,000 in 30 years?

  16. David (different one) says:

    You said “I think income-earning/taxpaying Americans are given incentives to have kids becuase income-earning/taxpaying Americans are a huge benefit to our country, and there needs to be more of us.”

    Most people are income-earning taxpaying Americans. Everybody is a benefit to our country? Are the people making 30,000 a year with 10 children a benefit to our country? Or are you just saying we should keep the white christian population percentage up in comparison to the minorities/immigrants?

    You said “I think Uncle Sam has a vested interest in rewarding this kind of behavior, I don’t think our story is too unique.”

    Why does Uncle Sam have a vested interest? The people with humongous families should be having even more kids because ________? Because statistically after you get to 10 kids it is a virtual guarantee that the 11th one will be perfect and beneficial to our country? One thing seems certain. Anybody that is having more kids because it lowers their taxes should probably not be having more kids, so there is no reason to have this incentive.

  17. @Dave and @David (different one)

    THANK YOU! I think people get confused with tax tables and try to keep their incomes lower… only the amount you earn in that bracket is taxed at that bracket’s rate.

    I think this is going to be misconception for years to come, unless we switch to a flat tax instead of a graduated tax.

    Thanks again!

  18. Chandra says:

    Unless you have adopted most of those kids, it’s very irresponsible, in this day and age of rising world population and diminishing natural resources, to have so many. As a single, child-free taxpayer, I resent subsiding your big family.

  19. Taxsnob says:

    The child credit is not an incentive, it’s a burden relief credit like other hardship credits.

    5 kids here.. Not planned, that’s life.. Not wasting ours in negs and resentment…

  20. It’s interesting that while 2010 was similar to 2009, 2011 looks there will be big tax rises for higher income earners as the Bush era tax cuts are not extended. Sounds like it is better to be a mid-income earner in America.

  21. Read this if you think you will have any money that you have put into gov accounts. It isn’t even your money.

    http://www.sharedprosperity.org/bp204/bp204.pdf

  22. Retirement Security

    According to EPI Vice President Ross Eisenbrey, “The financial well-being of average Americans is under assault. Rising economic inequality and increasing economic pressure on the middle class from globalization, the decline in unionization, and bad public policies are threatening the financial security of average Americans in ways we haven’t seen in more than 60 years.”

    The insecurity of the American middle class plays out dramatically in retirement. The conservative “you’re on your own” philosophy has accelerated the decline of traditional pension plans, led to an attack on guaranteed Social Security benefits, and has offered no hope in the face of declining personal savings. Shared prosperity is the way of the future.

  23. Seven Comments says:

    Why do we subsidized people to have children. As a nation are we really worried that the population is going to decline into nothing. I love taxsnob’s comment that they had 5 unplanned children. That’s a joke! Maybe if you were an illiterate third world immigrant I could understand not using birth control. But what kind of statement is that? ” Had five kids, didn’t plan for any of them. That’s life.” Wow! Nice work loser!

  24. Chandra says:

    Bravo Seven Comments!

    I just don’t have the guts to say exactly what I think sometimes but you summarized it nicely in the last three words of your post! Thanks.

  25. tony barone says:

    5 children “unplanned”?? and who is paying for it? I would understand unplaned if I was in a coma for 5 plus years and a woman extracted my semen somehow. maybe a stork delivered 5 kids to them. fornicating without birth control is irresponsible and they should shoulder that burden – not me.

  26. It looks to me like the wealthiest people in America continue to secure their standing and elite-ness by scary thoughts of higher tax brackets. It is the silliest thing I have ever heard to reduce your income potential to insure you don’t go up a tax bracket. No wonder the rich get richer and the poor get poorer. Do you see the wealthy reducing their income due to tax brackets. They aren’t worried about taxes, they are worried about more income. In their higher tax bracket, after paying taxes, they still make more than most people.

  27. If we put $5000 into a traditional IRA will it lower our tax liability for the end of the year. We are right over the $209,000 income level?

  28. Are these numbers correct as of Mar 2011?

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