- Tax bracket threshold amounts set to have a large increase
- Deductions are also predicted to get a large bump up
There have been many implications on the US economy while it’s been recovering from the lasting effects of COVID. One of these is the high amount of inflation experienced by individuals and businesses, which is predicted to have effects on next year’s tax brackets.
Typical Inflation Adjustments
Every year the IRS will make adjustments to things such as standard deductions, tax credits, and tax brackets to account for the changes in the cost of living. These changes do not affect the rates that brackets are taxed at, however it may affect which bracket entities find themselves within.
With this being said, Bloomberg’s 2022 Projected U.S. Tax Rates report expects the threshold dollar amounts for tax brackets to increase by about 3%. This rise is much steeper than what has been seen in previous years; with last year’s average increase being 0.95%.
Comparison of Tax Brackets
Married Filing Jointly
Rate | Current Bracket | Projected 2022 Bracket |
10% | $0 to $19,750 | $0 to $20,550 |
12% | $19,751 to $80,250 | $20,550 to $83,550 |
22% | $80,251 to $171,050 | $83,550 to $178,150 |
24% | $171,051 to $326,600 | $178,150 to $340,100 |
32% | $326,601 to $414,701 | $340,100 to $431,900 |
35% | $414,701 to $622,050 | $431,900 to $647,850 |
37% | $622,051 or more | $647,850 or more |
Single Filers
Rate | Current Bracket | Projected 2022 Bracket |
10% | $0 to $9,875 | $0 to $10,275 |
12% | $9,876 to $40,125 | $10,275 to $41,775 |
22% | $40,126 to $85,525 | $41,775 to $89,075 |
24% | $85,526 to $163,300 | $89,075 to $170,050 |
32% | $163,301 to $207,350 | $170,050 to $215,950 |
35% | $207,351 to $518,400 | $215,950 to $539,900 |
37% | $518,401 or more | $539,900 or more |
Standard Deduction Increases
Filing Status | Current Deduction | Projected 2022 Deduction |
Married Filing Jointly | $0 to $19,750 | $0 to $20,550 |
Head of Household | $19,751 to $80,250 | $20,550 to $83,550 |
Single Individual | $80,251 to $171,050 | $83,550 to $178,150 |
Wrap Up
The projected increases to both the threshold dollar amount of tax brackets and standard deductions may mean some restructuring to your 2022 tax plan is in order. While these numbers are still only projected, they allow for some planning to be done before the IRS releases its official 2022 inflation-adjusted amounts later this year.
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