Latest Tax Provisions
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Below, we provide a summary of the provisions most relevant to mutual fund investors. Please note that some of these provisions will sunset after 2025, which means those provisions revert back to "pre-Act" rates after that date, unless Congress acts again to extend them or make them permanent.
Federal Individual Income Tax Rates
The IRS offers seven tax brackets, with a top rate of 37%. The income ranges for each bracket will be indexed for inflation each year. The income ranges for each bracket will be indexed for inflation going forward, and the reduced income tax rate brackets will sunset after 2025.
Related Provisions
Amount Threshold Breakpoints
Reduced rates for Long-term capital gains and qualified dividend remain the same, but amount threshold breakpoints for each reduced rate were added based on tax filing status, and will be adjusted for inflation going forward.
Backup Withholding
Backup withholding will be 24%. Backup withholding generally applies to taxpayers whose Taxpayer Identification number does not match IRS records. It also applies to taxpayers who have under-reported their income. Individuals subject to backup withholding may also be subject to state backup withholding. This provision will sunset after 2025.
Unearned Income by Minors
Changes to taxation of unearned income by minors (aka "Kiddie Tax"). See Children's Federal Taxation Guidelines under UTMA for more information. This provision will sunset after 2025.
Marriage Penalty
The marriage penalty is permanently repealed for taxpayers in the 10%, 12%, 22%, 24%, and 32% income brackets. The standard deduction for married taxpayers in those brackets who are filing jointly is now 200% of single filers. This provision will sunset after 2025*.
*As of 2022, this penalty is only valid for certain states. Please contact your tax advisor to determine if this penalty is applicable to your situation.
Other Tax Situations
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IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.