The Internal Revenue Service announced the inflation and changes to the cost of living adjustments for the 2022 tax season. There are increases in the bracket amounts in the included changes, but the long-awaited and discussed tax hike isn’t taking place for the 2021 taxes.
The marginal tax rates remain the same at 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent for taxpayers, depending on their taxable income. Those who earn over $600,000 won’t see a different tax rate that applies to them.
New tax brackets effective in 2022
| TAX RATE | SINGLE | MARRIED FILING JOINTLY | HEADS OF HOUSEHOLDS |
|---|---|---|---|
| 10% | $0 to $10,275 | $0 to $20,550 | $0 to $14,650 |
| 12% | $10,275 to $41,775 | $20,550 to $83,550 | $14,650 to $55,900 |
| 22% | $41,775 to $89,075 | $83,550 to $178,150 | $55,900 to $89,050 |
| 24% | $89,075 to $170,050 | $178,150 to $340,100 | $89,050 to $170,050 |
| 32% | $170,050 to $215,950 | $340,100 to $431,900 | $170,050 to $215,950 |
| 35% | $215,950 to $539,900 | $431,900 to $647,850 | $215,950 to $539,900 |
| 37% | $539,900 or higher | $647,850 or higher | $539,900 or higher |
The above table shows the new tax brackets for the 2021 income taxpayers earned. The expected increase in the standard deduction and the minor increase in the tax brackets means most taxpayers with a similar taxable income the year before will pay a comparable or slightly less amount in federal income taxes.
The above table shows the new tax brackets for the 2021 income taxpayers earned. The expected increase in the standard deduction and the minor increase in the tax brackets means most taxpayers with a similar taxable income the year before will pay a comparable or slightly less amount in federal income taxes.
There are also changes in the benefits the taxpayers with a reduced income get due to COVID-19. Although the economy opened up significantly when put side by side with 2020, many businesses and individuals were affected. That’s why there are going to be some changes and increased benefits for taxpayers who had a reduced income.
Wrapping up
Wrapping up everything – this year is an important year while the US recovers from the financial impacts of the pandemic. The increases in the tax brackets and the new benefits the taxpayers can claim on their federal income tax returns put everything in a feasible place. If your income was affected in 2021 and, as a result, you earned less than 2020, you’re likely to pay a lot less in taxes, even if you don’t move to a bracket.