About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
It's never too early to start looking at your tax obligations for the coming tax season. The information in this article is for the 2022 tax year, which most taxpayers will file in 2023.
The seven 2021 tax rates themselves didn't change (they are the same as those in effect for the 2021 tax year); however, the tax bracket ranges were modified based on inflation. Because of this, it's possible you could be in a different tax bracket for 2022 than the last time you reported your taxes, even if your income has not changed.1
Reminder: Tax Brackets Are Marginal
The IRS divides income into different tax rates. Each subsequent portion of your income will have an increased tax rate. For example, if you are a single filer who made $40,125 in 2021, your first $10,275 will be taxed at 10 percent. The next portion of your income will be taxed at an increased rate; from $10,276 to $41,775, your tax rate will be 12 percent.
As your income increases, you’ll fall into higher tax brackets and will have a higher tax rate for each portion of your income.
Why Would My Tax Bracket Be Different?
The IRS regularly adjusts tax brackets to take inflation into consideration. This is because, with inflation, people will face higher prices, meaning the purchasing power of their dollar is decreased. Knowing this, the IRS adjusts brackets in order to avoid bracket creep, a circumstance that occurs when inflation pushes your income into a higher tax bracket, or credits and deductions are reduced. In this scenario, an individual may not actually have increased purchasing power or greater disposable income, even with an increase in wages and salaries.1
2021 Tax Brackets
Without further ado, here are the 2022 tax brackets according to your filing status and income from the IRS.1
10% Tax Rate
- Single Individuals: from $0 to $10,275
- Married Individuals Filing Jointly: from $0 to $20,550
- Heads of Households: from $0 to $14,650
- Married Individuals Filing Separately: from $0 to $10,275
12% Tax Rate
- Single Individuals: from $10,276 to $41,775
- Married Individuals Filing Jointly: from $20,551 to $83,550
- Heads of Households: from $14,651 to $55,900
- Married Individuals Filing Separately: from $10,276 to $41,775
22% Tax Rate
- Single Individuals: from $41,776 to $89,075
- Married Individuals Filing Jointly: from $83,551 to $178,150
- Heads of Households: from $55,901 to $89,050
- Married Individuals Filing Separately: from $41,776 to $89,075
24% Tax Rate
- Single Individuals: from $89,076 to $170,050
- Married Individuals Filing Jointly: from $178,151 to $340,100
- Heads of Households: from $89,051 to $170,050
- Married Individuals Filing Separately: from $89,076 to $170,050
32% Tax Rate
- Single Individuals: from $170,051 to $215,950
- Married Individuals Filing Jointly: from $340,101 to $431,900
- Heads of Households: from $170,051 to $215,950
- Married Individuals Filing Separately: from $170,051 to $215,950
35% Tax Rate
- Single Individuals: $215,951 to $539,900
- Married Individuals Filing Jointly: from $431,901 to $647,850
- Heads of Households: from $215,951 to $539,900
- Married Individuals Filing Separately: from $215,951 to $323,925
37% Tax Rate
- Single Individuals: over $539,901
- Married Individuals Filing Jointly: over $647,851
- Heads of Households: over $539,901
- Married Individuals Filing Separately: over $323,926
In addition to the tax inflation adjustments, the IRS also altered standard deductions. While the above rates and brackets are at the federal level, different states might have varying brackets and rates.
There are lots of important numbers that your need to keep in mind. In some cases, those numbers are annual limits that change each year. Other times, the figures do not often change but are used frequently. Given the variety of sources that report relevant numbers, it can be difficult to quickly find the right reference during a client meeting.
Download our two-page “Important Numbers 2022” resource. This quick reference guide covers the most important annual limits as well as figures that are commonly referred to during the year. It includes:
- Tax rates for MFJ, Single, and Estates/Trusts
- AMT annual limits
- LTCG rates for MFJ, Single, and Estates/Trusts
- Standard deductions for MFJ and Single
- Social Security annual limits (including earning limits)
- Full Retirement Age chart
- Social Security taxation summary for MFJ and Single
- IRMAA surcharges
- Retirement plan annual limits
- Traditional and Roth IRA annual limits
- Education tax credits
- Uniform Lifetime Table (abbreviated version)
- Single Lifetime Table (abbreviated version)
- Estate and gift tax annual limits
- HSA annual limits
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. So if you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
In the August Newsletter, I explore how you should invest money for your short-term goals after you've established an emergency fund. I also discuss how a Financial Advisor can help you avoid emotional decision-making with U.S. News and World Report and how to know if your Financial Advisor is the right fit for you. There are also blog posts where I outline how to complete a mid-year financial check-up and 5 college planning mistakes to avoid.
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