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2022 IRS Tax Brackets

Tax Brackets: What Are They and How Do They Work?

Rather than taxing all income at a flat rate, the U.S. taxes income progressively. Essentially, your income is taxed in chunks. Those chunks are divided into tax brackets. The U.S. currently has seven federal tax brackets that each correspond to an incrementally higher tax rate: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Once your income exceeds the upper range of a tax bracket, what’s left moves into the next bracket where it gets taxed at a higher rate.

Let’s make sense of this with an example. Consider a single filer has $50,000 of taxable income. Using 2022 tax brackets, here’s how they’ll be taxed:

  • The first $10,275 of income falls into the 10% tax bracket, resulting in a tax of $1,027.50.
  • The next $31,500 of income falls into the 12% tax bracket, resulting in a tax of $3,780.
  • The final $8,225 of income falls into the 22% tax bracket, resulting in a tax of $1,809.50.

The filer’s total tax bill for 2022 will be $6,617. However, they may not have to pay all of that if they qualify for tax credits.

Tax Brackets vs. Tax Credits 

Tax brackets are used to calculate your tax bill. Tax credits are then applied to lower your tax bill. Some tax credits are partially or fully refundable — if your tax bill drops to $0 after applying credits, you may get the remaining credit as a tax refund.

Common tax credits include:

  • The Earned Income Tax Credit
  • The Child Tax Credit
  • The Child and Dependent Care Credit
  • The Lifetime Learning Credit
  • The American Opportunity Tax Credit
  • The Recovery Rebate Credit

Read More: How to Reduce Taxable Income: Can the Average American Pay No Taxes?

Pros & Cons of Tax Brackets

Tax brackets are a feature of our progressive tax system. Rather than a flat tax rate that applies to all income, tax brackets are used to tax portions of income at different rates. Here are some of the pros and cons of this type of taxation.

Pros:

  • More of the tax burden falls on higher-income individuals
  • Lower-income individuals pay a smaller portion of their income toward taxes

Cons:

  • More difficult to understand than a flat tax
  • Encourages higher-income individuals to reduce their tax burden, therefore lowering tax revenue that could benefit society as a whole
  • Individuals near the edges of a tax bracket may be less motivated to earn more money so they don’t graduate to the next tax rate

How the Recent Changes From the IRS May Impact Your 2022 Tax Bracket

Every year the IRS adjusts the federal tax brackets to account for cost-of-living increases. It does this by evaluating the Chained-Consumer Price Index (C-CPI), which measures changes in consumer buying patterns.

Wages tend to rise with inflation. If the IRS doesn’t adjust the tax brackets accordingly, you might end up paying higher taxes on the same amount of income even though tax rates haven’t changed.

The highest tax rate that applies to your income is known as your marginal rate. So, someone whose last dollar of income is taxed at 22% could say they’re in the 22% tax bracket. Their entire income isn’t taxed at that rate, though.

To find your effective tax rate — the overall percentage of your income that goes toward taxes — you need to calculate your tax owed and divide it by your taxable income. In the previous example, a single filer owes $6,617. Their taxable income is $50,000. Their effective tax rate is 13.2%.

Read More: Guide to Filing Your Taxes in 2022

2022 Tax Brackets Depending on Your Income and Filing Status

The following tables outline the tax brackets for 2022 and 2021. The range where your total taxable income falls is your marginal tax bracket. Remember: You won’t pay that percentage of your entire income to taxes. You’ll only pay that tax on the amount of your income that falls within that range.

2022 federal income tax rates (for taxes due in April 2023)

Tax Rate Single Married Filing Jointly Head of Household Married Filing Separately
10% $0 to $10,275 $0 to $20,550 $0 to $14,650 $0 to $10,275
12% $10,276 to $41,775 $20,551 to $83,550 $14,651 to $55,900 $10,276 to 41,775
22% $41,776 to $89,075 $83,551 to $178,150 $55,901 to $89,050 $41,776 to $89,075
24% $89,076 to $170,050 $178,151 to $340,100 $89,051 to $170,050 $89,076 to $170,050
32% $170,051 to $215,950 $340,101 to $431,900 $170,051 to $215,950 $170,051 to $215,950
35% $215,951 to $539,900 $431,901 to $647,850 $215,951 to $539,900 $215,951 to $323,925
37% $539,901 or more $647,851 or more $539,901 or more $323,926 or more

 

2021 federal income tax rates (for taxes due in April 2022)

Tax Rate Single Married Filing Jointly Head of Household Married Filing Separately
10% $0 to $9,950 $0 to $19,900 $0 to $14,200 $0 to $9,950
12% $9,951 to $40,525 $19,901 to $81,050 $14,201 to $54,200 $9,951 to $40,525
22% $40,526 to $86,375 $81,051 to $172,750 $54,201 to $86,350 $40,526 to $86,375
24% $86,376 to $164,925 $172,751 to $329,850 $86,351 to $164,900 $86,376 to $164,925
32% $164,926 to $209,425 $329,851 to $418,850 $164,901 to $209,400 $164,926 to $209,425
35% $209,426 to $523,600 $418,851 to $628,300 $209,401 to $523,600 $209,426 to $314,150
37% $523,601 or more $628,301 or more $523,601 or more $314,151 or more

How to Lower Your Tax Bracket

You have to lower your income to get into a lower tax bracket. You can do so by claiming tax deductions.

Common tax deductions include:

  • Pre-tax contributions to a retirement account, including a Traditional IRA or 401k
  • Business expenses, including the use of a car for work or home as an office
  • Education expenses, including interest on a student loan
  • Charitable donations up to $300
  • One-half of the amount paid for self-employment taxes
  • Capital losses

These amounts are deducted from your gross income, resulting in your adjusted gross income. Each type of deduction has its own eligibility rules and limits on how much you can claim.

From there, you can take the greater of the standard deduction — a set amount for each filing status — or itemize your deductions to lower your adjusted gross income. The final amount is your taxable income, which you apply to the tax brackets in the tables above to calculate your tax bill.

Common itemized deductions include:

  • Homeownership costs, including interest on a mortgage and property taxes
  • Charitable donations
  • Out-of-pocket medical and dental expenses

Read More: Guide to Tax-Loss Harvesting

The Bottom Line

You can use the seven federal tax brackets to calculate how much income tax you owe in a given year. The tax bracket where your last dollar of income falls represents your marginal tax rate.

Claiming deductions can help lower your tax bracket, while claiming tax credits can lower your final tax bill.

Managing your taxes is one part of your overall financial plan. You can take a few actions now to get yourself on the right track.

  1. Download 5 Tax Hacks for Investors, an actionable guide with insights from fiduciary financial advisors. The guide is free.
  2. Sign up for the Personal Capital Dashboard. Millions of people use these free and secure professional-grade online financial tools. You can use them to see all of your accounts in one place, analyze your spending, and plan for long-term financial goals.
  3. Consider talking to a fiduciary financial advisor for more detailed guidance on your financial plan.

Get Started with Personal Capital

 

Author is not a client of Personal Capital Advisors Corporation and is compensated as a freelance writer.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. Compensation not to exceed $500. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.
Tanza is a CERTIFIED FINANCIAL PLANNER™ and former resident CFP® for Business Insider. She breaks down personal finance news and writes about taxes, investing, retirement, wealth building, and debt management. Tanza is the author of two ebooks, A Guide to Financial Planners and "The One-Month Plan to Master your Money."
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