Rising inflation means higher tax brackets and a larger standard deduction.
On Wednesday, the IRS released its 2022 federal income tax rates and brackets. The IRS automatically adjusts tax rates each year to reflect inflation. The breakpoint for each tax bracket will be about 3% higher across the board in 2021.
2022 Tax BracketsÂ
There are seven tax brackets that range from 10% to 37%. You'll use the 2022 brackets to determine your tax bill that will be due in 2023. You'll use 2021 brackets when you file your taxes on or before April 15, 2022.
Unmarried Individuals
Unmarried Individuals
| Tax Bracket | Taxable Income for 2022 (use when you file in 2023) | Taxable income for 2021 (use when you file in 2022) |
|---|---|---|
| 10% | Up to $10,275 | Up to $9,950 |
| 12% | $10,275 to $41,775 | $9,950 to $40,525 |
| 22% | $41,775 to $89,075 | $40,525 to $86,375 |
| 24% | $89,075 to $170,050 | $86,375 to $164,925 |
| 32% | $170,050 to $215,950 | $164,925 to $209,425 |
| 35% | $215,950 to $539,900 | $209,425 to $523,600 |
| 37% | Over $539,900 | Over $523,600 |
Married Individuals Filing Jointly or Surviving Spouses
| Tax Bracket | Taxable income for 2022 (use when you file in 2023) | Taxable income for 2021 (use when you file in 2022) |
|---|---|---|
| 10% | Up to $20,550 | Up to $19,900 |
| 12% | $20,550 to $83,550 | $19,900 to $81,050 |
| 22% | $83,550 to $178,150 | $81,050 to $172,750 |
| 24% | $178,150 to $340,100 | $172,750 to $329,850 |
| 32% | $340,100 to $431,900 | $329,850 to $418,850 |
| 35% | $431,900 to $647,850 | $418,850 to $628,300 |
| 37% | Over $647,850 | Over $628,300 |
Heads of Household
| Tax Bracket | Taxable income for 2022 (use when you file in 2023) | Taxable income for 2021 (use when you file in 2022) |
|---|---|---|
| 10% | Up to $14,650 | Up to $14,200 |
| 12% | $14,650 to $55,900 | $14,200 to $54,200 |
| 22% | $55,900 to $89,050 | $54,200 to $86,350 |
| 24% | $89,050 to $170,050 | $86,350 to $164,900 |
| 32% | $170,050 to $215,950 | $164,900 to $209,400 |
| 35% | $215,950 to $539,900 | $209,400 to $523,600 |
| 37% | Over $539,900 | Over $523,600 |
Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.
Tax rates apply to the income within each bracket. So if you're an unmarried individual with taxable income of $50,000, you won't pay 22% of that $50,000 to Uncle Sam.
According to the 2022 tax brackets (the ones you'll use when you file in 2023), you'd pay:
- 10% on the first $10,275, or $102.75
- 12% on the next $31,500 ($41,775 â€" $10,275 = $31,500), or $453.60
- 22% on the next $8,225 ($50,000 â€" $41,775 = $8,225), or $1,809.50
- Total tax bill: $2,365.85
Even though your marginal tax rate is 22%, you'd only pay 4.73% of your taxable income to Uncle Sam if you're a single filer with $50,000 of taxable income.
3 Tax Changes to Know for 2022
The modified tax brackets aren't the only changes for 2022. About 60 tax provisions were adjusted in the new year. A few highlights:
1. The Standard Deduction Is Higher
Most taxpayers get the biggest tax savings by taking advantage of the standard deduction instead of itemizing. For 2022, the standard deduction is:
- $12,950 for single filers and people who are married filing separately, a $400 increase.
- $25,900 for married couples and surviving spouses, an $800 increase.
- $19,400 for heads of household, a $600 increase.
2. Some Limited-Income Families Can Get an Extra $207
The maximum Earned Income Tax Credit will increase in 2022 to $6,935, from $6,728 in 2021. You need at least three children to qualify for the maximum amount.
3. You Can Contribute an Extra $1,000 to Your 401(k)
If you have an employer-sponsored tax-deferred retirement plan, like a 401(k) or 403(b), your maximum contribution is $20,500 in 2022, up $1,000 from $19,500 in 2021. The additional 'catch-up' contribution workers ages 50 and older can make will remain at $6,500.
2 Tax Rules That Aren't Changing in 2022
Here are two tax rules that aren't changing in the new year.
1. IRA Contribution Limits Won't Change
The traditional IRA and Roth IRA contribution limits will remain at $6,000 for people under 50. The extra $1,000 'catch-up' contribution the IRS allows people 50 and older to make won't change either.
2. There's No Limit on Itemized Deductions
The Tax Cuts and Jobs Act of 2017 suspended these limits.
Ready to Start Your 2022 Tax Prep?
If you're ready to dive into your taxes, you can check out this comprehensive summary of 2022 tax changes courtesy of the IRS.
Even if you're not ready to jump into 2022 tax planning mode just yet, keep in mind it's a good time to check your tax withholdings and make adjustments if necessary. Just make sure you file your 2021 return or ask for an extension by the April 15, 2022 deadline. If you can't afford your tax bill for 2021, it's essential that you file a tax return anyway and ask for an IRS payment plan.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected].
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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