Bunching your expenses to make tax itemizing worthwhile
Standard & itemized tax deductions for the 2022 tax year

2022 inflation-adjusted income tax brackets

Happy face hot air balloon_pexels-don-hainzl-1277109
Inflation has spiked, which doesn't leave any of us as happy as this rising hot air balloon. However, some tax related-inflation figures for 2022 could put a smile on some taxpayers' faces. (Photo by Don Hainzl from Pexels)

Inflation is all the talk right now, with October's 6.2 percent jump in consumer prices grabbing the attention of shoppers, politicians, and news media.

But inflation also matters when it comes to taxes.

Every year, the Internal Revenue Service revises an expansive array amounts that apply to tax situations. Today is that day for the agency's annual inflation adjustments that will generally affect federal returns filed in 2023.

And while right now your tax attention is more on ways to reduce this year's bill, not what will happen with a tax return that's almost 14 months away from filing, you still need to take note of the upcoming changes.

Wise tax planning requires comparing: Effective tax planning means knowing how your current tax year's circumstances might change in the upcoming one.

Comparing the numbers will help you determine, for example, whether you should postpone some earnings into 2022, where the income tax brackets are a bit wider, so you won't be bumped into a higher one on your 2021 return.

Or maybe you'll want to itemize this year, especially is the $10,000 limit on state and local taxes is increased, and take the bigger standard deduction the next year. The numbers can help you determine whether bunching expenses in 2021 or 2022 would be better for your tax bottom line.

So, yes, the IRS' annual tax inflation adjustments are useful. They also are intimidating. But the ol' tax blog is here to help.

To help you gauge how the IRS numbers will affect you, this post is the first of the ol' blog's annual 10-part inflation series. (Spoiler/preview: There's a directory of all the posts at the end of this post.)

Parceling out the many changes: The myriad figures — more than 60 Internal Revenue Code provisions are affected — are detailed in two IRS official documents.

There's the news release with highlights of the amounts that it expects to be of greatest interest to most taxpayers. Then there's the official Revenue Procedure 2021-45, which goes into more, and more dense IRS detail, on the changes.

And let me jump in here with a quick aside about an earlier inflation announcement. The IRS also makes yearly adjustments to retirement account figures. It released that information first. In case you missed it, you can check 2022 changes to IRA and 401(k) and other Golden Years' savings amounts in my Nov. 4 post on retirement and pension plan inflation adjustments for 2022.

Now back to today's announced changes. If you want to sort through the release and revenue procedure yourself, have at it by clicking on the links a couple of paragraphs above.

However, I like to take things a bit more deliberately. That's why for the last few years, I've broken these announcements into the previously mentioned 10-part annual series on what the new inflation figures mean to major tax provisions.

As is the tradition here, Part 1 of the series is a look at changes in 2022 to the seven tax rates' income brackets.

Just keep in mind as you peruse these numbers and all in the 2022 tax inflation series, that they will apply to returns you'll file in 2023. The return that's you'll submit to the IRS next year is for the 2021 tax year.

Yeah, the crossover can be confusing. But I'll keep reminding you of the differences and, most importantly, will include in each part of the inflation series the 2021 tax year amounts for comparison with the 2022 figures.

OK, enough previewing. Let's get to 2022's income tax rates and taxable income brackets.

Same rates, different income amounts: Despite some rumblings this year from the Biden Administration about higher tax rates for the wealthy, so far the rates established by the Tax Cuts and Jobs Act of 2017 are still in place. And the IRS is planning on them being the same in 2022.

So we're still looking at seven tax rates and how much of our earnings falls into each of the tax brackets. The table below shows what the rates will be for 2021 and the income ranges their tax brackets encompass.

2022 Individual Tax Rates and Income Brackets
YOU WILL USE THESE TAX RATES AND INCOME BRACKETS 
WHEN COMPLETING YOUR 2022 TAX RETURN TO BE FILED IN 2023.

Tax Rate

Single

Head of Household

Married
Filing Jointly
or Surviving Spouse

Married Filing Separately

10%

Up to $10,275

Up to $14,650

Up to $20,550

Up to $10,275

12%

$10,276 to $41,775

$14,651 to $55,900

$20,551 to $83,550

$10,276 to $41,775

22%

$41,776 to $89,075

$55,901 to $89,050

$83,551 to $178,150

$41,776 to $89,075

24%

$89,076 to $170,050

$89,051 to $170,050

$178,151 to $340,100

$89,076 to $170,050

32%

$170,051 to $215,950

$170,051 to $215,950

$340,101 to $431,900

$170,051 to $215,950

35%

$215,951 to $539,900

$215,951 to $539,900

$431,901 to $647,850

$215,951 to $323,925

37%

$539,901 or more

$539,901 or more

$647,851 or more

$323,926 or more



And here, as promised for comparison purposes, are the 2021 tax year rates and income tax brackets that will apply to this year's tax return you'll file in 2022.

2021 Individual Tax Rates and Income Brackets
YOU WILL USE THESE TAX RATES AND INCOME BRACKETS 
WHEN COMPLETING YOUR 2021 TAX RETURN TO BE FILED IN 2022.

Tax Rate

Single

Head of Household

Married
Filing Jointly
or Surviving Spouse

Married Filing Separately

10%

Up to $9,950

Up to $14,200

Up to $ 19,900

Up to $9,950

12%

$9,951 to $40,525

$14,201 to $54,200

$19,901 to $81,050

$9,951 to $40,425

22%

$40,526 to $86,375

$54,201 to $86,350

$81,051 to $172,750

$40,426 to $86,375

24%

$86,376 to $164,925

$86,351 to $164,900

$172,751 to $329,850

$85,376 to $164,925

32%

$164,926 to $209,425

$164,901 to $209,400

$329,851 to $418,850

$164,926 to $209,425

35%

$209,426 to $523,600

$209,401 to $523,600

$418,851 to $628,300

$209,426 to $314,150

37%

$523,601 or more

$523,601 or more

$628,301 or more

$314,151 or more



If you just haven't had enough tax numbers, you also can check out the ol' blog's special page on tax rates and income brackets through the years.

Progressive tax rates pay off: By increasing the income amounts to which each of the current seven tax rates apply, you'll be able to make more money without your tax bill growing so much.

Your final tax bill also is kept under relative control thanks to our progressive tax rate system. Your earnings are taxed at all the rates that apply to your income, not just at the top rate that applies to the last dollar you earn.

Applying the just announced 2022 tax brackets, here's how it works, using a single taxpayer — let's call her Kathy — as an example.

Kathy's 2022 annual income is $100,000. That would put her in the 24 percent tax bracket. But her tax bill isn't $24,000, which is 24 percent of $100,000.

Under our progressive tax system, the first chunk of Kathy's earnings next year, up to $10,275, is taxed at 10 percent. The next tax rate, 12 percent, applies her earnings of $10,276 to $41,775.

Her 2022 pay from $41,776 to $89,075 is taxed at 22 percent. And the last $10,925 that Kathy will make next year will be taxed at 24 percent.

That means her taxes break out as:

$10,275

x

10%

=

$1,027.50

$31,500

x

12%

=

$3,780.00

$47,300

x

22%

=

$10,406.00

$10,925

x

24%

=

$2,622.00

The total means Kathy's total tax bill in 2022 will come to $17,835.50.

And because of the larger income brackets in each tax rate, it also means that Kathy's bill will be a bit smaller than her 2021 debt to the IRS, which was $18,021. I guess that makes up a bit for Kathy not getting a raise in 2022.

Of course, this above calculations are a basic, for-illustration-purposes-only example. The ol' blog's tax-savvy readers have already realized it doesn't take into account the deductions (standard or itemized) that Kathy can claim, or any other tax breaks that could reduce her taxable income.

But wait, there's more: And speaking of Kathy's potential deductions and adjustments to income and tax credits, many of them also are adjusted for inflation.

Those changes for 2022 will be noted in the coming days in the continuation of the 2022 tax inflation series. You can get a preview of what's coming up in the directory below. When those posts go live, I'll add the links here. This first post is linked in the index.

You'll also see a couple of other links that are already live.

Back in May, the IRS announced the 2022 inflation amounts for high deductible health plans (HDHPs) and associated health savings accounts (HSAs), which I'll touch on again in Part 5, the medical tax inflation category.

Similarly, the Social Security Administration (SSA) also has released the 2022 wage base amount. This income figure affects the Social Security part of the Federal Insurance Contributions Act (FICA) payroll taxes, so it gets a mention in Part 7 of this series.

And, of course, there are the retirement-related tax inflation amounts I mentioned earlier in this post.

2022 Tax Year Inflation Series: But in keeping with the long-standing series sequence, the next-up Part 2 features the always popular examination of the standard deduction amounts. It's not too much of a spoiler to say that they, like the income brackets in today's 2022 inflation series opener, will be bumped up a bit, too.

  1. 2022 tax rates and income brackets 
  2. Standard deduction, personal exemptions and itemized deduction limits   
  3. Retirement, pension plan contribution limits   
  4. Credits and deductions, including adoption costs and assistance, Lifetime Learning Credit, Earned Income Tax Credit, educators' expenses, interest on education loans and transportation fringe benefits  
  5. Medical-related tax provisions, including contributions to a flexible spending account, health savings account, medical savings account, eligible long-term care premiums and the Affordable Care Act minimal essential coverage penalty 
  6. Estate and gift tax limits, kiddie tax and new capital gains tax income brackets  
  7. Alternative Minimum Tax exemption amounts and 2022 Social Security wage base  
  8. International tax issues (foreign income, housing exclusions, passports, expatriation tax costs) 
  9. Penalties, for both individuals and tax pros, for things such as failure to file a timely 1040 or certain tax information returns 
  10. Standard mileage deduction rates (issued separately, and later, by the IRS)

 

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