The income limits for federal tax rates will be higher in 2022, according to the IRS, due to the quicker rate of inflation. With the top tax rate poised to remain at 37%, a married couple will need to earn nearly $20,000 more next year to enter the top tax bracket.
Each year, the tax office modifies tax bands to account for rising consumer prices, but this year’s adjustments are more than usual. The basic income tax rates set by Congress in the 2017 Tax Cuts and Jobs Act, which set the lowest threshold at 10% and the highest at 37 percent, are not changing.
According to the Bureau of Labor Statistics, consumer prices rose 6.2 percent in October compared to the same month a year ago, quicker than the previous month’s 5.4 percent gain. Families are paying more for everything from fuel to groceries, which is putting a strain on household budgets and diminishing their purchasing power.
The increased tax bracket income criteria constitute a 3 percent increase in total. The increases were closer to 1% in the previous year. The new thresholds for the nation’s seven tax brackets in 2022 are listed below.
The personal exemption will stay at $0 in 2021, according to the IRS; the personal exemption was repealed as part of the Tax Cuts and Jobs Act.
The government also announced that the standard deduction will be increased to account for inflation. For married couples, it will rise to $25,900 next year, an increase of $800 over the current tax year. The standard deduction for single taxpayers will rise to $12,950, a $400 increase, according to the IRS.