2019 Federal Income Tax Brackets

After major tax legislation overhauls with the Tax Cuts and Jobs Act, most of the tax changes are inflation adjustments from 2018’s tax brackets.

The TCJA requires for annual inflation adjustments to be computed based on the chained consumer price index rather than the regular consumer price index. This permanent change results in rapid higher tax brackets for taxpayers.

2019 IRS Tax Brackets and Rates

(for taxes due in April 2020)

2019 Single Tax Brackets

Taxable income is:
Over -

But not over -

The tax is
USD 0USD 9,70010%
USD 9,700USD 39,475USD 970.00 + 12%
USD 39,475USD 84,200USD 4,543.00 + 22%
USD 84,200USD 160,725USD 14,382.50 + 24%
USD 160,725USD 204,100USD 32,748.50 + 32%
USD 204,100USD 510,300USD 46,628.50 + 35%
USD 510,300. . . . . .USD 153,798.50 + 37%

2019 Married Filing Jointly Tax Brackets

Taxable income is:
Over -

But not over -

The tax is
USD 0USD 19,40010%
USD 19,400USD 78,950USD 1,940.00 + 12%
USD 78,950USD 168,400USD 9,086.00 + 22%
USD 168,400USD 321,450USD 28,765.00 + 24%
USD 321,450USD 408,200USD 65,497.00 + 32%
USD 408,200USD 612,350USD 93,257.00 + 35%
USD 612,350. . . . . .USD 164,709.50 + 37%

2019 Married Filing Separately Tax Brackets

Taxable income is:
Over -

But not over -

The tax is
USD 0USD 9,70010%
USD 9,700USD 39,475USD 970.00 + 12%
USD 39,475USD 84,200USD 4,543.00 + 22%
USD 84,200USD 160,725USD 14,382.50 + 24%
USD 160,725USD 204,100USD 32,748.50 + 32%
USD 204,100USD 306,175USD 46,628.50 + 35%
USD 306,175. . . . . .USD 82,354.75 + 37%

2019 Head of Household Tax Brackets

Taxable income is:
Over -

But not over -

The tax is
USD 0USD 13,85010%
USD 13,850USD 52,850USD 1,385.00 + 12%
USD 52,850USD 84,200USD 6,065.00 + 22%
USD 84,200USD 160,700USD 12,962.00 + 24%
USD 160,700USD 204,100USD 31,322.00 + 32%
USD 204,100USD 510,300USD 45,210.00 + 35%
USD 510,300. . . . . .USD 152,380.00 + 37%

How to Calculate Tax Due and Effective Tax Rate?

Let’s assume that your taxable income (after USD 24,400 standard deduction and consider no credits for simplicity) is USD 84,000 and you are filing as married filing jointly. Your marginal tax rate is 22%. Now we will calculate your effective tax rate and the tax due. We will use the 10% tax rate on your income up to USD 19,400, the 12% tax rate on taxable income between USD 19,400 and USD 78,950, and 22% on the part of your taxable income over USD 78,950.

Here are our calculations;

USD 84,000 – USD 78,950 = USD 5,050

USD 5,050 x 22% = USD 1,111

USD 9,086 + USD 1,111 = USD 10,197 → total tax due

USD 10,197 / (USD 84,000 + USD 24,400)= 9,41% → effective tax rate

2019 Standard Deduction

Filing StatusDeduction Amount
Single or Married filing separatelyUSD 12,200
Married filing jointly or Qualifying widow(er)USD 24,400
Head of householdUSD 18,350

The standard deduction for people who are over age 65 is USD 13,850 for single taxpayers, and USD 27,000 for married filing jointly taxpayers.

2019 Alternative Minimum Tax (AMT)

The AMT is an additional income tax under the current tax law. The AMT was created in 1969 to ensure that high-income taxpayers could not avoid taxes by using various tax shelters. The AMT adjusts high taxable income of taxpayers by setting limits on certain tax benefits. The taxpayers calculate the tentative minimum tax and the regular tax and are required to pay the excess amount if any.  

2019 Alternative Minimum Tax Exemption

Filing StatusExemption Amount
Single or Head of householdUSD 71,700
Married filing jointly or Qualifying widow(er)USD 111,700
Married filing separatelyUSD 55,850

2019 Alternative Minimum Tax Brackets

Filing Status26% AMT Tax Rate28% AMT Tax Rate
Married filing separatelyAMTI up to USD 97,400excess AMTI of USD 97,400
All other filersAMTI up to USD 194,800excess AMTI of USD 194,800

To avoid a heavy tax burden for low- and middle-income taxpayers, IRS requires taxpayers to calculate alternative minimum taxable income (AMTI) with additional deductions and exemptions to determine the taxable income.

2019 Alternative Minimum Tax Exemption Phaseout Thresholds

Filing StatusThreshold
Married filing jointlyUSD 1,020,600
All other filersUSD 510,300

How to Calculate Alternative Minimum Tax?

Using the same facts above for regular tax calculation, we need to add back standard deduction in our AMT calculation. Assume that the married filing jointly couple has an incentive stock option of USD 50,000.

The calculation is as follows;

USD 84,000 + USD 24,400 + USD 50,000 = USD 158,400 → Alternative minimum taxable income

USD 158,400 – USD 111,700 = USD 46,700

USD 46,700 x 26% = USD 12,142 → alternative minimum tax, which is higher than regular tax amount of USD 10,197 (calculated above)

Therefore, the taxpayer needs to pay additional USD 1,945 with alternative minimum tax.

2019 Long-Term Capital Gains Tax Rate

Long-term
capital gains tax rate
SingleMarried filing
jointly
Married filing
separately
Head of household
0%USD 0 to
USD 39,375
USD 0 to
USD 78,750
USD 0 to
USD 39,375
USD 0 to
USD 52,750
15%USD 39,376 to
USD 434,550
USD 78,751 to
USD 488,850
USD 39,376 to
USD 244,425
USD 52,751 to
USD 461,700
20%USD 434,551
or more
USD 488,851 or
more
USD 244,426 or
more
USD 461,701 or
more

When you hold an asset for one year or less, the capital gain is defined as a short-term capital gain. Short-term capital gains are taxed as ordinary income.

How to Calculate Short- and Long-Term Capital Gains Tax?

Assume that you bought 500 shares of ABC stock at USD 20 per share and sold these shares at USD 25 per share. Your ordinary income is USD 108,400 and filed as married filing jointly.

Note: Ordinary income includes wages, salaries, interests, dividends, bonds (except municipal bonds).

If you hold these stocks less than a year (short-term capital gains tax);

(500 shares x USD 25) – (500 shares x USD 20) = USD 2,500 → capital gain

USD 2,500 x 20% = USD 500 → short-term capital gain tax

If you hold these stocks for more than a year (long-term capital gains tax);

(500 shares x USD 25) – (500 shares x USD 20) = USD 2,500 → capital gain

USD 2,500 x 15% = USD 375 → long-term capital gain tax

2019 Gift Tax Exclusion and Estate Tax Exemption

For 2019, the annual gift tax exclusion to gifts to each donee is USD 15,000.

The estate tax exemption is USD 11.4 million per decedent.

Buttom Line

While we try to simplify federal income tax brackets for individual taxpayers to figure the tax bill, you also need to consider whole tax forms and instructions for tax credits and deductions to lower your tax bracket.

Author

Covers investment, financial analysis and related financial market issues for BrightHedge. He has extensive experience in portfolio management, business consulting, risk management, and accounting areas.

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Important Information

The investment information, comments and recommendations contained herein are not subject to investment advice. The comments and recommendations contained herein are based on personal views. These views may not fit your financial situation and your risk and return preferences. For this reason, based only on the information contained herein, investment decisions may not have the appropriate outcome.