Inflation Impacts 2022 Tax Brackets

Monday, December 13, 2021

By Susan Kaplan

Planning means comparing! Effective tax planning means knowing how your current tax year’s circumstances might be different in the one ahead.

Comparing the numbers helps you determine if you should postpone some earnings into 2022, where the income tax brackets are a bit wider, so you won’t be bumped into a higher one on your 2021 return.

And what about deductions? It could be better, based on the current and next year’s standard amounts, for you to shift some deductible tax expenses from this year into the next or vice versa and itemize.

So, yes, the IRS annual inflation adjustments are useful. But, this year they are downright intimidating. The high inflation amounts that households and businesses have been experiencing this year are likely to lead to larger increases in tax brackets and other inflation-adjusted tax items in 2022.

Bloomberg Tax & Accounting released its 2022 Projected U.S. Tax Rates report last week, estimating the inflation-adjusted amounts in the Tax Code that will eventually come officially from the Internal Revenue Service. This is a sneak peek at the amount of tax savings clients may realize thanks to increases in deduction limitations, and upward adjustments to tax bracket thresholds. From 2021 to 2022, most inflation-adjusted amounts in the Tax Code, including the threshold dollar amounts for tax rate brackets, are expected to increase by about 3%.

Married Filing Jointly (MFJ) and Surviving Spouses

10% – $0 to $20,550
12% – $20,550 to $83,550
22% – $83,550 to $178,150
24% – $178,150 to $340,100
32% – $340,100 to $431,900
35% – $431,900 to $647,850
37% – $647,850 or more

Married Filing Separate (MFS)

10% – $0 to $14,650
12% – $14,650 to $55,900
22% – $55,900 to $89,050
24% – $89,050 to $170,050
32% – $170,050 to $215,950
35% – $215,950 to $323,925
37% – $323,925 or more

Head of Household

10% – $0 to $14,650
12% – $14,650 to $55,900
22% – $55,900 to $89,050
24% – $89,050 to $170,050
32% – $170,050 to $215,950
35% – $215,950 to $539,900
37% – $539,900 or more

Unmarried Individuals (other than Surviving Spouses and Heads of Households)

10% – $0 to $10,275
12% – $10,275 to $41,775
22% – $41,775 to $89,075
24% – $89,075 to $170,050
32% – $170,050 to $215,950
35% – $215,950 to $539,900
37% – $539,900 or more

Estates and Trusts

10% – $0 to $2,750
12% – $2,750 to $9,850
22% – $9,850 to $13,450
24% – $13,450 or more

Standard Deduction

Bloomberg Tax & Accounting has projected the following standard deduction amounts for 2022:

Filing Status Projected 2022

Standard Deduction

Married Filing Jointly/Surviving Spouses $25,900
Heads of Household $19,400
All Other Taxpayers $12,950

Alternative Minimum Tax (AMT)

Projected 2022 AMT exemption amounts are shown below.

Filing Status Projected 2022

AMT Exemption Amount

Married Filing Jointly/Surviving Spouses $118,100
Unmarried Individuals

(other than Surviving Spouses)

$75,900
Married Individuals Filing Separate Returns $59,050
Estates and Trusts $26,500

The following provisions have changed from last year’s report based on recent tax legislation:

  • The disqualified income limitation, for purposes of the §32 earned income tax credit, increased from $2,200 to $10,000.
  • The limitation on the §179D deduction for energy efficient commercial building property is now adjusted for inflation.
  • The phaseout range for the Section 25A Lifetime Learning Credit is no longer adjusted for inflation.

Reach Out To Us: Now is the time to start planning ahead to cut your tax bill for next year. Let our tax experts help you minimize your tax liability so you can keep more of your profit in your pocket!