Inflation Impacts 2022 Tax Brackets
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!