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- Your tax liability is the amount of taxes you owe to the IRS or your state government.
- Your income tax liability is determined by your earnings and filing status.
- Certain deductions can lower the amount of income taxed, and credits can further reduce how much you owe.
- This article was reviewed for accuracy and clarity by Sheneya Wilson, an expert on Personal Finance Insider’s tax review board.
- See Personal Finance Insider’s picks for the best tax software »
Most Americans who earn an income are responsible for giving a cut to the government.
How much you owe to the IRS depends on your filing status and earnings and is known as your tax liability.
What is tax liability?
America has a progressive tax system with seven income tax brackets ranging from 10% to 37%.
Each filing status has its own tax brackets (although married couples filing jointly and qualifying widow(er)s use the same tax table); these represent the rates at which the individual or couple’s income is taxed as they reach certain thresholds. The tax calculated is your tax liability, but not necessarily the tax due.
Below are the tax brackets for single filers, head of household filers, and married filers that applied to income earned in 2020 and 2021. They’re adjusted each year for inflation.
Tax brackets for single filers:
| Rate | 2021 | 2020 |
| 10% | $0 – $9,950 | $0 – $9,875 |
| 12% | $9,951 – $40,525 | $9,876 – $40,125 |
| 22% | $40,526 – $86,375 | $40,126 – $85,525 |
| 24% | $86,376 – $164,925 | $85,526 – $163,300 |
| 32% | $164,926 – $209,425 | $163,301 – $207,350 |
| 35% | $209,426 – $523,600 | $207,351 – $518,400 |
| 37% | $523,601 or more | $518,401 or more |
Tax brackets for head of household filers:
| Rate | 2021 | 2020 |
| 10% | $0 – $14,200 | $0 – $14,100 |
| 12% | $14,201 – $54,200 | $14,101 – $53,700 |
| 22% | $54,201 – $86,350 | $53,701 – $85,500 |
| 24% | $86,351 – $164,900 | $85,501 – $163,300 |
| 32% | $164,901 – $209,400 | $163,301 – $207,350 |
| 35% | $209,401 – $523,600 | $207,351 – $518,400 |
| 37% | $523,601 or more | $518,401 or more |
Tax brackets for married joint filers:
| Rate | 2021 | 2020 |
| 10% | $0 – $19,900 | $0 – $19,750 |
| 12% | $19,901 – $81,050 | $19,751 – $80,250 |
| 22% | $81,051 – $172,750 | $80,251 – $171,050 |
| 24% | $172,751 – $329,850 | $171,051 – $326,600 |
| 32% | $329,851 – $418,850 | $326,601 – $414,700 |
| 35% | $418,851 – $628,300 | $414,701 – $622,050 |
| 37% | $628,301 or more | $622,051 or more |
Standard deductions
The standard deduction is also indexed each year for inflation. Here are the figures for 2021 and 2020.
| Filing status | 2021 | 2020 |
| Single | $12,550 | $12,400 |
| Head of household | $18,800 | $18,650 |
| Married filing jointly | $25,100 | $24,800 |
How do you estimate tax liability?
If you add up every dollar you earned in 2020 – or simply took your annual salary figure – and apply it to the tax tables above, you will likely get a higher number than what you’re actually responsible for paying.
That’s because you don’t pay the exact percentage for the tax bracket, as the system is progressive. If you fall into the 12% tax bracket, only the income earned in excess of $9,950 in 2021 is taxed at 10%. Additionally, certain deductions will lower the amount of your income that’s taxed to begin with, while certain credits can directly impact the refund amount.
Is tax liability the same as tax due?
When you start a new job, you’re required to fill out Form W-4. This tells your employer how much to withhold from your paychecks for income taxes based on your filing status, family situation, and any additional jobs you have.
Your employer sends the amount withheld for income taxes from each paycheck to the IRS on your behalf. At the beginning of each calendar year, you’ll receive a W-2 – or 1099 if you’re an independent contractor – from each employer you had, detailing how much you earned and how much was withheld for taxes. Self-employed taxpayers generally pay their taxes quarterly rather than through withholdings.
If there are changes to your financial situation during the year, you’re responsible for updating and resubmitting your W-4 to your employer to make sure the correct amount of money is withheld to cover your tax liability. Self-employed individuals can assess their tax liability through the use of tax planning.
If you qualify for tax credits, you can apply them to your tax bill to lower the amount due on a dollar-for-dollar basis. Some credits are even refundable, meaning that if their total value wipes out your tax bill completely, you can get the excess money attributed to the credits back as a tax refund.
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