The IRS has announced its annual inflation adjustments for the 2022 tax year. The adjustments raise the thresholds for federal tax brackets for income taxes and capital gains for 2022.
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That means many taxpayers with the same or even slighter higher income in 2022 vs. 2021 will still be in a lower bracket. They’ll be subject to lower tax bills.
“Adjusting tax brackets for inflation is especially important this year,” said Garrett Watson, senior policy analyst for the Tax Foundation. “That’s because of the unusually high inflation we are experiencing as, we hope, we transition out of the pandemic. The adjustments ensure that taxpayers are not taxed merely on inflationary gains in their incomes, but rather on their real income after adjusting for inflation.”
Will you fall into a higher federal tax bracket in 2022? Check our comparative tables (below) to see how you’ll fare vs. 2021, no matter what your income level is.
If you are starting to gather paperwork for your 2021 return, of course you need to know what the brackets and rates are for 2021 taxes.
If you are turning your attention to tax planning for 2022, keep this in mind: Tax rates — as opposed to brackets — did not change compared to 2021. The IRS will use the same seven rates.
Tax Brackets: What’s New For 2022
The 2022 tax brackets do change.
That means in 2022 it will take higher income to become subject to each of the six higher tax brackets. That’s generally good for taxpayers.
The IRS adjusts the brackets to account for inflation.
Look at it this way: If your income stays the same in 2022 vs. 2021 and your 2021 income was just enough to reach any one of the six upper brackets, you’ll fall to a lower bracket in 2022.
To see where the thresholds are for each bracket in 2022 vs. 2021, compare the tables below.
Federal Tax Brackets For Ordinary Income: 2021 Vs. 2022
Compare 2021 federal tax brackets and tax rates to the 2022 tax brackets and their marginal tax rates. The 2021 brackets and rates are shown below.
2021 Federal Tax Brackets With Each Bracket’s Marginal Tax Rate, Based On A Taxpayer’s Taxable Income
| Tax rate | Single filers | Married joint filers | Heads of households |
|---|---|---|---|
| 10% | $0 – $9,950 | $0 – $19,900 | $0 – $14,200 |
| 12% | $9,951 – $40,525 | $19,901 – $81,050 | $14,201 – $54,200 |
| 22% | $40,526 – $86,375 | $81,051 – $172,750 | $54,201 – $86,350 |
| 24% | $86,376 – $164,925 | $172,751 – $329,850 | $86,351 – $164,900 |
| 32% | $164,926 – $209,425 | $329,851 – $418,850 | $164,901 – $209,400 |
| 35% | $209,426 – $523,600 | $418,851 – $628,300 | $209,401 – $523,600 |
| 37% | $523,601 or more | $628,301 or more | $523,601 or more |
2022 Federal Tax Brackets With Each Bracket’s Marginal Tax Rate, Based On A Taxpayer’s Taxable Income
| Tax rate | Single filers | Married joint filers | Heads of households |
|---|---|---|---|
| 10% | $0 – $10,275 | $0 – $20,550 | $0 – $14,650 |
| 12% | $10,276 – $41,775 | $20,551 – $83,550 | $14,651 – $55,900 |
| 22% | $41,776 – $89,075 | $83,551 – $178,150 | $55,901 – $89,050 |
| 24% | $89,076 – $170,050 | $178,151 – $340,100 | $89,051 – $170,050 |
| 32% | $170,051 – $215,950 | $340-101 – $431,900 | $170,051 – $215,950 |
| 35% | $215,951 – $539,900 | $431,901 – $647,850 | $215,951 – $539,900 |
| 37% | $539,901 or more | $647,851 or more | $539,901 or more |
Bigger Standard Deduction In 2022
Tax brackets are not the only tax provision changed by the IRS’s annual inflation adjustments. The adjustments also mean a larger standard deduction for 2022.
The standard deduction for single taxpayers and married individuals filing separately rises to $12,950 for 2022. That’s up $400 from 2021’s standard deduction.
For married couples filing jointly, for tax year 2022 the standard deduction climbs to $25,900. That’s an $800 increase from 2021.
For heads of households, the 2022 standard deduction will be $19,400 for tax year 2022, up $600.
2022 Personal Exemption
The personal exemption for tax year 2022 remains $0. That’s the same as it was for 2021. Elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
Alternative Minimum Tax
The Alternative Minimum Tax (AMT) exemption for single filers in tax year 2022 is $75,900. The 2021 exemption amount was $73,600.
The exemption is the amount that a taxpayer is allowed to deduct from their alternative minimum taxable income before calculating the taxpayer’s AMT liability. The exemption amount depends on a taxpayer’s filing status.
The 2022 exemption is $118,100 for married couples filing jointly. It was $114,600 for married couples filing jointly.
Estate Tax Exclusion
Estates of decedents who die during 2022 have a basic exclusion amount of $12.06 million. That’s up from $11.7 million for estates of decedents who died in 2021.
The annual exclusion for gifts increases to $16,000 for calendar year 2022. That is an increase from $15,000 for 2021.
Medical Savings Accounts
For tax year 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450. That’s up $50 from tax year 2021.
The deductible can not be more than $3,700. That’s an increase of $100 from tax year 2021.
For self-only coverage, the maximum out-of-pocket expense amount is $4,950. That’s an increase of $150 from 2021.
For tax year 2022, for family coverage, the annual deductible must be at least $4,950. That’s up from $4,800 in 2021. The most the deductible can be is $7,400. That’s a $250 increase vs. 2021.
For family coverage, the out-of-pocket expense limit is $9,050 for tax year 2022, an increase of $300 from tax year 2021.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and active mutual fund managers who consistently outperform the market.
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