Each year, the IRS adjusts tax rates, standard deduction amounts, and other limits to account for tax law updates and cost-of-living adjustments.
Currently for 2022, there are seven tax brackets: 10%, 12%, 24%, 32%, 35%, and 37%. Your filing status (example: single, married filing jointly, head of household) will be the determining factor of where your taxable income will fall within the tax brackets. Keep in mind that should the Build Back Better Act pass in its current form, tax brackets will be reorganized and expanded.
Standard deduction amounts will increase to $12,950 for individuals and married couples who file separately, $19,400 for head of household, and $25,900 for married couples who file jointly.
Long-Term Capital Gains tax rates (0%, 15%, and 20%) remain unchanged, but the income level has changed:
Married filing jointly: 0% rate for income up to $83,350. 15% rate for income between $83,351 and $517,200. 20% rate for income over $517,200
Single taxpayers: 0% rate for income up to $41,675. 15% rate for income between $41,676 and $459,750. 20% rate for income over $459,750
Head of household: 0% rate for income up to $55,800. 15% rate for income between $55,801 and $488,500. 20% rate for income over $488,500
Other popular limit increases and credit adjustments for 2022 include:
- Estates of those who die during 2022 have an exclusion amount of $12,060,000
- Annual exclusion for gifts increases to $16,000
- Maximum adoption credit is $14,890
- Earned income credit maximum limit is $6,935
- Alternative Minimum Tax exemption amount for single filers is $75,900 and begins to phase out at $539,900. For joint filers, the exemption amount is $118,100 and begins to phase out at $1,079,800.
- Foreign income exclusion amount is $112,000
- Flexible Spending Arrangement contributions via salary reduction has increased to $2,850
- 401(k) limit increases to $20,500
- Educator expenses increase to $300 for expenses paid for books, supplies, and other classroom materials.
For a detailed list of tax rate schedules and other tax changes, review the IRS’s Revenue Procedure 2021-45.