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Your 2022 Tax Brackets vs. 2021 Tax Brackets

The income ranges, adjusted annually for inflation, determine which tax rates apply to you

You may be making plans for filing your 2021 income taxes, but in a few short weeks you’ll be living in tax year 2022, and tax year 2022 will differ substantially from 2021. Your tax brackets will be slightly higher, for example, as will your standard deduction.

There is still time to reduce your 2021 tax bill, but for many deductions, the door slams shut on Dec. 31. If it looks like you’ll get a big bill on your 2021 taxes, knowing the tax brackets for 2022 can help you make adjustments in the New Year so you don’t get stung again.

How the brackets work

In the American tax system, income tax rates are graduated, so you pay different rates on different amounts of taxable income, called tax brackets. There are seven tax brackets in all. The more you make, the more you pay. For example, a single taxpayer will pay 10 percent on taxable income up to $9,950 earned in 2021. The top tax rate for individuals is 37 percent for taxable income above $523,600 for tax year 2021.

The Internal Revenue Service increases those brackets from year to year to account for inflation and reduce “bracket creep,” when taxpayers get pushed into higher tax brackets, not because they earned more money but because of rising inflation. In tax year 2020, for example, a single person with taxable income up to $9,875 paid 10 percent, while in 2021, that income bracket rose to $9,950. Similarly, brackets for income earned in 2022 have been adjusted upward as well.

Tax brackets for income earned in 2022

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

Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service

Tax brackets for income earned in 2021

  • 37% for incomes over $523,600 ($628,300 for married couples filing jointly)
  • 35% for incomes over $209,425 ($418,850 for married couples filing jointly)
  • 32% for incomes over $164,925 ($329,850 for married couples filing jointly)
  • 24% for incomes over $86,375 ($172,750 for married couples filing jointly)
  • 22% for incomes over $40,525 ($81,050 for married couples filing jointly)
  • 12% for incomes over $9,950 ($19,900 for married couples filing jointly)
  • 10% for incomes up to $9,950 ($19,900 for married couples filing jointly)

Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service

Importantly, your highest tax bracket doesn’t reflect how much you pay in federal income taxes. If you’re a single filer in the 22 percent tax bracket for 2022, you won’t pay 22 percent on all your taxable income. You will pay 10 percent on taxable income up to $10,275, 12 percent on the amount from $10,275, to $41,775 and 22 percent above that (up to $89,075).

You should also note that the standard deduction will rise to $12,950 for single filers for the 2022 tax year, from $12,550 the previous year. The standard deduction for couples filing jointly will rise to $25,900 in 2022, from $25,100 in the 2021 tax year. Single filers age 65 and older who are not a surviving spouse can increase the standard deduction by $1,750. Each joint filer 65 and over can increase the standard deduction by $1,400 apiece, for a total of $2,800 if both joint filers are 65-plus. You need to have more tax deductions than the standard deduction to make itemizing your tax return worthwhile.

The IRS uses the chained consumer price index (CPI) to measure inflation, as mandated by 2017 tax reform. Like the more well-known consumer price index, the chained CPI measures price changes in about 80,000 items. The chained CPI takes into account the fact that when prices of some items rise, consumers often substitute other items. If the price of beef rises, for example, people switch to chicken.

If you’re not an economist, the main difference between the two measures is that, over time, the chained CPI rises at a slower pace than the traditional CPI. (Which, to be precise, is the Consumer Price Index for All Urban Consumers or CPI-U.) From September 2011 through September 2021, the CPI rose by 20.9 percent and the chained CPI by only 17.9 percent, a difference of 3 percentage points.

If you get slammed with a big tax bill for 2021, you should talk with a tax adviser about how to reduce that in 2022. It’s probably easier to have extra taken out of each paycheck than face a big tax bill next year. A good first step is to look at how much tax you get taken from your paycheck. The Internal Revenue Service has a free withholding estimator that can tell you how much you should have taken out of each paycheck.

John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger’s Personal Finance and  USA Today and has written books on investing and the 2008 financial crisis. Waggoner’s  USA Today investing column ran in dozens of newspapers for 25 years.

https://www.aarp.org/money/taxes/info-2020/income-tax-brackets.html?intcmp=AE-HP-TTN-R2-POS3-REALPOSS-TODAY

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