Inflation Adjustments for Tax Year 2022

The IRS recently released the 2022 annual inflation adjustment report and how it will affect tax brackets for the 2022 tax year. These adjustments in totality are cited in Revenue Procedure 2021-45.

Whether you are filing jointly or singly, the standard deduction is rising. For married couples filing jointly, it rises to $25,900, up to $800 from the last tax year. For a single taxpayer, it rises to $12,950, up to $400 from the prior tax year. However, the personal exemption will remain at 0, identical to 2021. There is also no limitation on itemized deductions, also identical to years prior.

The marginal rates range from 10% to 37% with five other rates falling in-between.

- 37%: single taxpayers with incomes greater than $539,900. Married couples filing jointly, $647,850.

- 35%: single taxpayers with incomes over $215,950. Married couples filing jointly, $431,900.

- 32%: single taxpayers with incomes over $170,050. Married couples filing jointly, $340,100.

- 24%: single taxpayers with incomes greater than $89,075. Married couples filing jointly, $178,150.

- 22%: single taxpayers with incomes greater than $41,775. Married couples filing jointly, $83,550.

- 12%: single taxpayers with incomes greater than $10,275. Married couples filing jointly, $20,550.

- 10%: Single taxpayers with incomes of $10,275 or less. Married couples filing jointly, $20,550.

The marginal tax rates aren’t the only things to rise due to inflation. The Earned Income Tax Credit, the monthly limitation for qualified transportation fringe benefit and parking, dollar limitation for salary reductions for contributions to health flexible spending arrangements, deductible requirements in medical savings accounts, foreign earned income exclusion, estates of decedents basic exclusion, annual gift exclusion, and the maximum credit allowed for adoptions have all increased. While some only by $50-$150, others have jumped anywhere from $500-$1000 from the previous tax year.

Have these changes to the tax brackets affected you? If you have questions or need professional help with your 2022 tax year filing then enlist the help of the professionals at The Center for Financial, Legal, and Tax Planning, Inc. Please contact us at (618) 997-3436 for more information.