In December 2017, Congress passed a major tax reform law called the Tax Cuts and Jobs Act (TCJA), which made some of the most dramatic changes to the tax code that the nation has seen in decades. One of the biggest and most important changes made by the TCJA was the introduction of new “tax brackets.” That’s a term you’ve probably heard before – but what does it actually mean? Are there different systems for state versus federal tax brackets? And as a California resident, which tax bracket do you fall under? Our California tax preparation service has the answers. Keep reading to learn more about how tax brackets might affect you – then contact our CPA firm for personalized tax help driven by more than 20 years of experience.

What Tax Bracket Am I In?

If you’re like most taxpayers, you have probably wondered at some point: “What are tax brackets?” If that question sounds familiar, don’t worry – you aren’t alone, and that’s precisely what we’re here to explain.

Before the TCJA, there were seven federal income tax brackets, which varied depending on the taxpayer’s filing status. For example, the seven pre-TCJA tax brackets and rates for single filers were formerly as follows:

  1. $0 to $9,525 (10%)
  2. $9,526 to $38,700 (15%)
  3. $38,701 to $93,700 (25%)
  4. $93,701 to $195,450 (28%)
  5. $195,451 to $424,950 (33%)
  6. $424,951 to $426,700 (35%)
  7. $426,701 and higher (39.6%)

Using this old federal system, that means earnings up to $9,525 would be taxed at a rate of 10%, while earnings that fell into the next bracket ($9,526 to $38,700) would be taxed at a rate of 15%, and so forth.

Under the TCJA, there are still seven tax brackets per filing status – but the thresholds separating them have shifted. The accompanying federal tax rates, or the percentages at which taxpayers are taxed by the federal government, have also changed. That means you might be in a new tax bracket, or be taxed differently than you used to be – even if your income and filing status are the same as they were last year when you filed. Working with an experienced California CPA makes it easier and less stressful to file correctly and on time, while helping you to claim all of the credits and deductions you qualify for.

Federal Income Tax Brackets and Rates for 2018-2019

The TCJA takes effect for the 2018 tax year. That means when you file your federal income tax return in April 2019 – or later in the year, if you plan on taking advantage of an IRS tax filing extension – you will be impacted by a new and unfamiliar set of tax rules, making professional tax services for individuals essential.

The new tax rules include updated sets of federal tax brackets and tax rates. Under the TCJA, the new income tax brackets and rates are as follows, depending on filing status:

  • Single Filers
    1. $0 to $9,525 (10%)
    2. $9,526 to $38,700 (12%)
    3. $38,701 to $82,500 (22%)
    4. $82,501 to $157,500 (24%)
    5. $157,501 to $200,000 (32%)
    6. $200,001 to $500,000 (35%)
    7. $500,001 and higher (37%)
  • Married (Filing Jointly)
    1. $0 to $19,050 (10%)
    2. $19,051 to $77,400 (12%)
    3. $77,401 to $165,000 (22%)
    4. $165,001 to $315,000 (24%)
    5. $315,001 to $400,000 (32%)
    6. $400,001 to $600,000 (35%)
    7. $600,001 and higher (37%)
  • Married (Filing Separately)
    1. $0 to $9,525 (10%)
    2. $9,526 to $38,700 (12%)
    3. $38,701 to $82,500 (22%)
    4. $82,501 to $157,500 (24%)
    5. $157,501 to $200,000 (32%)
    6. $200,001 to $300,000 (35%)
    7. $300,001 and higher (37%)
  • Heads of Households
    1. $0 to $13,600 (10%)
    2. $13,601 to $51,800 (12%)
    3. $51,801 to $82,500 (22%)
    4. $82,501 to $157,500 (24%)
    5. $157,501 to $200,000 (32%)
    6. $200,001 to $500,000 (35%)
    7. $500,001 and higher (37%)

California Income Tax Brackets

When it comes to tax compliance and financial planning, it isn’t only the IRS that taxpayers need to worry about. It is also crucial for California taxpayers to be mindful of state laws and requirements, which are rigorously enforced by agencies like the California Department of Tax and Fee Administration (CDTFA) and Franchise Tax Board (FTB).

In contrast to the federal system, which has only seven tax brackets, California has no fewer than 10 at present. The 2018-2019 California income tax brackets are as follows:

  • Single Filers
    1. $0 to $8,014 (1%)
    2. $8,015 to $19,000 (2%)
    3. $19,001 to $29,988 (4%)
    4. $ 29,989 to $41,628 (6%)
    5. $41,629 to $52,611 (8%)
    6. $52,612 to $268,749 (9.3%)
    7. $268,750 to $322,498 (10.3%)
    8. $322,499 to $537,497 (11.3%)
    9. $ 537,498 to $999,999 (12.3%)
    10. $1,000,000 and higher (13.3%)
  • Married (Filing Jointly)
    1. $0 to $16,029 (1%)
    2. $16,030 to $38,001 (2%)
    3. $38,002 to $59,977 (4%)
    4. $59,978 to $83,257 (6%)
    5. $83,258 to $105,223 (8%)
    6. $105,224 to $537,499 (9.3%)
    7. $537,500 to $644,997 (10.3%)
    8. $644,998 to $999,999 (11.3%)
    9. $1,000,000 to $1,074,995 (12.3%)
    10. $1,074,996 and higher (13.3%)

Note that tax brackets can change over time and may differ for taxpayers with other filing statuses. You should consult with an experienced tax accountant for personalized assistance when preparing and filing your state or federal returns.

Federal and California Tax Preparation Services in Roseville and Sacramento

In light of the many changes caused by the TCJA, this year will likely be one of the most tumultuous yet for thousands of taxpayers and small business owners. That makes it especially important to make sure you have dependable tax guidance from an experienced accountant this upcoming tax season.

Don’t let 2019 catch you off-guard. Get trustworthy, professional tax help on your side by contacting Cook CPA Group online for a free consultation, or by calling us at (916) 724-1665 today.