Historical Federal Income Tax Information

Basic Concepts of the Federal Income Tax

• Filing status was introduced in 1948, with classifications of single and of married couple filing jointly.  Head of household was introduced in 1952, and surviving spouse in 1954.
• Tax brackets have been used from the beginning, generally in a progressive fashion (those who earn more pay a larger effective tax rate).  Tax rates also vary according to year, as determined by Congress.  The rates rose for the First World War, fell shortly after, rose again in the Great Depression and for the Second World War, declined very slowly afterwards, then rose again in the early 1990s due to recurring budget deficits.  A "zero tax bracket" was introduced in 1977, but discontinued in 1987, and its benefits absorbed into the standard deduction.  (In the table entries denoted with a * symbol, this bracket is treated as if it were a standard deduction.)
• Exemptions were available for each household from the beginning, but married couple exemptions were not necessarily double the value of a single exemption.  Smaller exemptions for dependents were introduced in 1917.  Exemption values were equalized (per person) in 1944.  Additional exemptions for blindness and/or old age were introduced in 1948, but discontinued in 1986 (and their benefits were included with standard deductions).
• Deductions were available from the beginning for excise taxes, state and local taxes, casualty and theft losses, business expenses, and personal interest.  Deductions for charitable contributions were introduced in 1917, and for medical expenses in 1942.  Deductions for federal excise taxes were eliminated in 1917, for state excise taxes (other than gasoline) in 1964, for gasoline taxes in 1979, for state sales taxes in 1987, and for personal interest in 1991.  The standard deduction option was introduced in 1944.
• Credits to reduce the statutory rate (for general purposes) were available in 1923-1931, in 1934-1943, in 1946-1950, in 1974, in 1981, and in 2000-2001.  Sometimes the credit was a specific dollar amount, sometimes it was a percentage of the tax, and sometimes it was a special reduction in the tax rate.  Special credits are also available for specific expenses which Congress desires to encourage.  Recapturing of some credits began in 1963.  Refundable earned income credits were introduced in 1975, effectively creating negative tax brackets.
• Surcharges on the income tax of a general nature were assessed in 1917, in 1940, in 1942-1943, and in 1968-1970.  They were computed as a percentage of the statutory rates in 1940 and in 1968-1970, effectively changing the marginal rates.  Special surcharges are also made for specific purposes which Congress desires to discourage.
• Minimum taxes were introduced in 1970.  The Alternative Minimum Tax was introduced in 1979.
• Maximum taxes were legislated in 1944-1963, and in 1971-1981, by capping the effective (not marginal) tax rate.  This approach effectively created a smaller marginal tax bracket for the highest earners.  In 1988-1990, a higher marginal tax bracket was used on upper-middle-income earners to phase out the benefits of the lower tax brackets.  In other words, the highest earners would pay an effective tax rate equal to the highest marginal rate.
• Non-taxable income included salaries of state and local government employees before 1939, unemployment compensation before 1979, and Social Security benefits before 1984.
• Withholding for income taxes was done from the beginning, but discontinued in 1916, and reinstated in 1943.
• Capital gains began receiving special treatment in 1922.
• Income averaging was introduced in 1964, but discontinued in 1987.  It was reintroduced for farmers in 1998.
• Indexing for inflation of tax bracket boundaries and personal exemption values was begun in 1985.  However, the alternative minimum tax is not indexed for inflation.  (These table entries are denoted with a + sign.)

Lowest Tax Bracket (from 1948, for married filing jointly)
Years	Rate	Ceiling	Comments (Items not included in given rate)
1913-1915	1%	$20,000
1916	2%	$20,000
1917	2%	$2,000
1918	6%	$4,000
1919-1923	4%	$4,000	In 1923, a statutory credit effectively reduced this rate to 3%.
1924	2%	$4,000	A statutory credit effectively reduced this rate to 1.5%.
1925-1928	1.5%	$4,000	A statutory credit effectively reduced this rate to 1.125%.
1929	0.5%	$4,000	A statutory credit effectively reduced this rate to 0.375%.
1930-1931	1.5%	$4,000	A statutory credit effectively reduced this rate to 1.125%.
1932-1940	4%	$4,000	In 1940, a defense surchage effectively increased this rate to 4.4%.  In 1934-1940, some statutory deductions effectively reduced this rate.
1941	10%	$2,000	Some statutory deductions effectively reduced this rate.
1942-1943	19%	$2,000	Some statutory deductions effectively reduced this rate.
1944-1945	23%	$2,000
1946-1947	20%	$2,000	A statutory credit effectively reduced this rate to 19%.
1948-1950	20%	$4,000	In 1948-1948, statutory credits effectively reduced this rate to 16.6%, and in 1950, to 17.4%.
1951	20.4%	$4,000
1952-1953	22.2%	$4,000
1954-1963	20%	$4,000
1964	16%	$1,000
1965-1976	14%	$1,000	In 1974, a statutory rebate effectively reduced this rate.
1977-1978	14%	$3,200 *
1979-1981	14%	$3,400 *	In 1981, a statutory credit effectively reduced the rate to 13.875%.
1982	12%	$3,400 *
1983-1984	11%	$3,400 *
1985-1986	11%	$3,540 + *	See the Indexing to Inflation table below.
1987	11%	$3,000
1988-2001	15%	$29,750 +	See the Indexing to Inflation table below.
2002	10%	$12,000
2003-	10%	$14,000 +	See the Indexing to Inflation table below.

 

Highest Tax Bracket (from 1948, for married filing jointly)
Years	Rate	Floor	Comments (Items not included in given rate)
1913-1915	7%	$500,000
1916	15%	$2,000,000
1917	67%	$2,000,000
1918	77%	$1,000,000
1919-1921	73%	$1,000,000
1922-1923	58%	$200,000	In 1923, a statutory credit effectively reduced this rate to 43.5%.
1924	46%	$500,000
1925-1928	25%	$100,000
1929	24%	$100,000
1930-1931	25%	$100,000
1932-1935	63%	$1,000,000
1936-1940	79%	$5,000,000	In 1940, a defense tax surcharge effectively increased this rate to 81.1%.
1941	81%	$5,000,000
1942-1943	88%	$200,000
1944-1945	94%	$200,000	The tax was limited to a 90% effective rate.
1946-1947	91%	$200,000	A statutory credit effectively reduced this rate to 86.45%.  The tax was limited to a 90% effective rate (85.5% after credit).
1948-1951	91%	$400,000	In 1948-1949, statutory credits effectively reduced this rate to 82.13%, and in 1950, to 84.36%.  The tax was limited to a 77% effective rate in 1948-1949, 87% in 1950, and 87.2% in 1951.
1952-1953	92%	$400,000	The tax was limited to an 88% effective rate.
1954-1963	91%	$400,000	The tax was limited to an 87% effective rate.
1964	77%	$400,000
1965-1976	70%	$200,000	Vietnam War surcharges effectively increased this rate to 75.25% in 1968, 77% in 1969, and 71.75% in 1970.  The tax was limited to a 60% effective rate in 1971, and 50% in 1972-1976.  In 1974, a statutory rebate effectively reduced this rate.
1977-1978	70%	$203,200 *	The tax was limited to an 50% effective rate.
1979-1981	70%	$215,400 *	In 1981, a statutory credit effectively reduced the rate to 69.125%.  The tax was limited to an 50% effective rate.
1982	50%	$85,600 *
1983	50%	$109,400 *
1984-1986	50%	$162,400 + *	See the Indexing to Inflation table below.
1987	38.5%	$90,000
1988-1990	28%	$29,750 +	See the Indexing to Inflation table below.
1991-1992	31%	$82,150 +	See the Indexing to Inflation table below.
1993-2000	39.6%	$89,150 +	Floor statutorially adjusted to $250,000 in 1994.  See the Indexing to Inflation table below.
2001	39.1%	$297,350
2002-2003	38.6%	$307,050 +	See the Indexing to Inflation table below.
2004-	35%	$319,100 +	See the Indexing to Inflation table below.

 

Exemption Values
Years	Single Person Exemption	Comments
1913-1916	$3,000	$4,000 for a married couple, no exemptions for dependents
1917-1920	$1,000	$200 for each dependent
1921-1924	$1,000	$2,500 for each married couple (but only $2,000 in 1921-23 for lowest earning couples), $400 for each dependent
1925-1931	$1,500	$3,500 for a married couple, $400 for each dependent
1932-1939	$1,000	$2,500 for a married couple, $400 for each dependent
1940	$800	$2,000 for a married couple, $400 for each dependent
1941	$750	$400 for each dependent
1942-1943	$500	$1,200 for a married couple, $350 for each dependent
1944-1947	$500	From 1944 forward, single and dependent exemptions are equal, and a married couple receives 2 exemptions.
1948-1969	$600
1970	$625
1971	$675
1972-1978	$750
1979-1984	$1,000
1985-1986	$1,040 +	Indexing for inflation began in 1985.  See the Indexing to Inflation table below.
1987-	$1,900 +	For 1987, the personal exemption value was adjusted by law.  See the Indexing to Inflation table below.

 

Indexing to Inflation
Years	Lowest Bracket Ceiling	Highest Bracket Floor	Single Person Exemption	Comments
1984	$3,400	$162,400	$1,000	The 1984 values are the base upon which indexing began.
1985	$3,540	$169,020	$1,040
1986	$3,670	$175,250	$1,080
1987	$3,000	$90,000	$1,900	All amounts were adjusted by law.
1988	$29,750	$29,750	$1,950
1989	$30,950	$30,950	$2,000
1990	$32,450	$32,450	$2,050
1991	$34,000	$82,150	$2,150	The highest bracket floor was adjusted by law.
1992	$35,800	$86,500	$2,300
1993	$36,900	$89,150	$2,350
1994	$38,000	$250,000	$2,450	The highest bracket floor was adjusted by law.
1995	$39,000	$256,500	$2,500
1996	$40,100	$263,750	$2,550
1997	$41,200	$271,050	$2,650
1998	$42,350	$278,450	$2,700
1999	$43,050	$283,150	$2,750
2000	$43,850	$288,350	$2,800
2001	$45,200	$297,350	$2,900
2002	$12,000	$307,050	$3,000	The lowest bracket ceiling was adjusted by law.
2003	$14,000	$311,950	$3,050	The lowest bracket ceiling was adjusted by law.
2004	$14,300	$319,100	$3,100
2005	$14,600	$326,450	$3,200
2006	$15,100	$336,550	$3,300

Sources:

• Internal Revenue Service, Form 1040 Instructions, published annually.
• Wilson, Robert A., Personal Exemptions and Individual Income Tax Rates, 1913-2002, U.S. Internal Revenue Service, 2002.