Your Tax Bracket for 2022 Has Changed
The IRS yesterday released the inflation-adjusted income tax scale for 2022, which will increase at a maximum annualized margin since Congress revised the tax code in 2017. Here’s a look at how it breaks.
Expect a 3% increase in existing tax tier income limits.
Tax rates will remain the same, but the thresholds have been increased by about 3%, so the group’s minimum income will increase by at least a few hundred dollars. Here’s a breakdown of the rate caps for 2022:
- 37% for income over $ 539,900 ($ 64,7,850 if co-filing)
- 35% for income of more than $ 215 950 (431 900 dollars in the joint submission)
- 32% for income over $ 170,050 ($ 340,100 joint filing)
- 24% for income of more than 89075 dollars ($ 178 150 at a joint submission)
- 22% for income over $ 41,775 ($ 83,550 if joint filing)
- 12% for income over $ 10,275 ($ 20,550 if joint filing)
- 10% for income of $ 10,275 or less ($ 20,550 if joint filing)
Remember, these are tax thresholds, not flat taxes on your total earnings. A simple explanation of how marginal taxes work can be found in this Lifehacker post .
While the adjustment is relatively significant, these changes do not reflect more recent inflation data, which show a 6.2% year-on-year rise in consumer prices.
The standard deduction will also increase in 2022.
The standard deduction required by most taxpayers increases by $ 400, from $ 12,550 to $ 12,950. For married couples applying together, it increases by $ 800 from $ 25,100 to $ 25,900.
Another notable change concerns the annual gift exemption, which rises to $ 16,000 in calendar year 2022, up from $ 15,000 in 2021. The IRS also recently announced an inflationary increase to 401 (k) premiums, which you can read about here .
The highest paying companies may also be subject to higher taxes.
While the IRS is overseeing inflation adjustments for federal tax categories, it is possible that Congress could still change those rates through legislation. However, it does not appear that this will happen at the moment. Democrats are currently debating a tax break for millionaires to fund the Recovery Efficiency Act, which is currently going through Congress.