IRS new standard deduction and tax brackets: What to know

Income tax brackets and the standard deduction will be adjusted in 2022 in response to inflation.

The Internal Revenue Service on Nov. 10 announced its annual inflation adjustments for tax year 2022 for more than 60 tax-related provisions — notably including an increase to the standard deduction amount and higher federal income tax brackets. The changes come as consumer prices continue to soar.

Here’s what to know about the inflation-related adjustments.

How much the standard deduction will increase

For tax year 2022, the standard deduction — which is the amount that taxpayers who do not itemize their deductions can subtract from their income before tax is applied — will be:

$25,900 for married couples filing jointly, which is an $800 increase.

$12,950 for single filers and married people filing separately, which is a $400 increase.

$19,400 for heads of households, which is a $600 increase.

How tax brackets will change

Federal marginal tax rates, or the amount of additional tax paid on additional income, will also change in 2022. The federal income tax brackets for tax year 2021 can be found here.

The federal income tax rates for 2022 will be:

Incomes greater than $539,900 for single filers and $647,850 for joint filers: 37%

Incomes greater than $215,950 for single filers and $431,900 for joint filers: 35%

Incomes greater than $170,050 for single filers and $340,100 for joint filers: 32%

Incomes greater than $89,075 for single filers and $178,150 for joint filer: 24%

Incomes greater than $41,775 for single filers and $83,550 for joint filers: 22%

Incomes greater than $10,275 for single filers and $20,550 for joint filers: 12%

Incomes of $10,275 or less for single filers and $20,550 or less for joint filers: 10%

Other inflation adjustments announced

The IRS also announced changes to the alternative minimum tax exemption, the earned income tax credit, monthly limits on transportation benefits, flexible spending arrangements and estate tax exemptions, among other things.

More information on the changes can be found here.

When the changes will take effect

The inflation changes are for tax year 2022, meaning they “generally apply to tax returns filed in 2023,” the IRS said.

The tax inflation adjustments made for tax year 2021, which can be found here, will still apply when taxpayers file their 2021 income taxes in 2022.

Why the changes were made

The IRS makes changes each year to the standard deduction, tax brackets and other tax credits to account for cost of living increases in the United States. This “affects the effective tax rate faced by individuals and corporations,” according to Investopedia.

The economy typically deals with inflation each year, so the IRS “adjusts tax brackets upward,” Investopedia said.

The changes come as the consumer price index — a measure of “the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services” — increased by 6.2% in October compared with last year, which CNBC reported is the biggest jump in more than 30 years.

The IRS’s adjustments, however, are not based on the inflation data released by the U.S. Department of Labor, The Hill reported. The IRS uses a “slightly different measure of inflation” and bases its changes on average inflation for a 12-month period ending in August.

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Bailey Aldridge is a reporter covering real-time news in North and South Carolina. She has a degree in journalism from the University of North Carolina at Chapel Hill.

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