The IRS said the income thresholds for tax brackets will be higher in 2022, reflecting the faster pace of inflation. That means a married couple will need to earn almost $20,000 more next year to enter the top tax bracket, with the tax rate set to remain at 37%.
The tax agency typically adjusts tax brackets each year to account for rising consumer prices, but this year’s increases are greater than usual. What’s not changing are the basic income tax rates that were set by Congress under the 2017 Tax Cuts and Jobs Act, which set the lowest threshold at 10% and the highest at 37%.
The IRS said it is adjusting other thresholds to reflect inflation, such as the standard deduction for married couples, which will rise 3.2% to $25,900 next year. Even so, that increase won’t match the pace of inflation, which has accelerated this year due to supply-chain snarls, labor shortages and other issues.
Consumer prices increased 6.2% from the year-ago period, slightly faster than their 5.4% increase the previous month, the Bureau of Labor Statistics said Wednesday. That’s taking a bite out of household budgets and reducing their purchasing power, with families paying more for everything from gasoline to food.
Overall, the new tax bracket thresholds represent increases of about 3%. In the prior year, the increases were closer to 1%. Here are the new thresholds for the nation’s seven tax brackets in 2022.
- 10% tax bracket: single individuals earning up to $10,275 and married couples filing jointly earning up to $20,550.
- 12% tax bracket: single filers earning more than $10,275 and married couples filing jointly earning over $20,550.
- 22% tax bracket: single filers earning more than $41,775 and married couples filing jointly earning over $83,550.
- 24% tax bracket: single filers earning more than $89,075 and married couples filing jointly earning over $178,150.
- 32% tax bracket: single filers earning more than $170,050 and married couples filing jointly earning over $340,100.
- 35% tax bracket: single filers earning more than $215,950 and married couples filing jointly earning over $431,900.
- 37% tax bracket: single filers earning more than $539,900 and married couples filing jointly earning over $647,850.
The IRS said the personal exemption will remain at $0, the same as in 2021; the personal exemption was eliminated in the Tax Cuts and Jobs Act.
The agency said it’s also boosting the standard deduction to account for inflation. Next year, it will increase to $25,900, or $800 higher than in the current tax year, for married couples. The standard deduction will increase to $12,950, or a boost of $400, for single taxpayers, the agency said.
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