Your Tax Bracket Just Changed for 2022 – Lifehacker

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Yesterday, the IRS released inflation-adjusted income tax brackets for 2022, which will be increasing by the largest year-to-year margin since Congress revamped the tax code in 2017. Here’s a look at how it breaks down.

Expect a 3% bump to existing tax bracket income limits

The tax rates will remain the same, but the thresholds have been bumped up by about 3%, so that a bracket’s minimum income is increased by at least a few hundred dollars. Here’s a look at the breakdown of the marginal rates for 2022:

  • 37% for incomes over $539,900 ($647,850 when filing jointly)
  • 35% for incomes over $215,950 ($431,900 when filing jointly)
  • 32% for incomes over $170,050 ($340,100 when filing jointly)
  • 24% for incomes over $89,075 ($178,150 when filing jointly)
  • 22% for incomes over $41,775 ($83,550 when filing jointly)
  • 12% for incomes over $10,275 ($20,550 when filing jointly)
  • 10% for incomes of $10,275 or less ($20,550 when filing jointly)

Remember that these are tax thresholds, not flat taxes on your total earnings. For a simple explanation on how marginal taxes work, check out this Lifehacker post.

While the adjustment is relatively significant, these changes don’t reflect more recent inflation rate data that reveals a 6.2% year-over-year increase in consumer prices.

The standard deduction is also increasing in 2022

The standard deduction claimed by most taxpayers is increasing by $400, from $12,550 to $12,950. For married couples filing jointly, it goes up $800, from $25,100 to $25,900.

Another notable change is for the annual exclusion for gifts, which increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021. Recently the IRS also announced inflationary increases to 401(k) maximum contributions, which you can read about here.

Top earners might be taxed more, too 

While the IRS oversees the inflation adjustments for federal tax brackets, it’s possible that Congress could still change these rates through legislation. It doesn’t look like that will happen at this point, however. Democrats are currently discussing a tax surcharge on millionaires to fund the Build Back Better Act, which is currently working its way through Congress.

 

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