How the IRS Inflation Adjustments for 2022 Affect Taxpayers (2023)

The Internal Revenue Service (IRS) recently announced inflation adjustments for 2022 that will impact taxpayers when they file their taxes in 2023. These adjustments are made annually to prevent bracket creep, which occurs when inflation pushes taxpayers into higher tax brackets. The adjustments affect various tax provisions, including standard deductions, tax brackets, and more.

Standard Deduction Increases for 2022

The standard deduction is claimed by the majority of taxpayers and helps reduce their taxable income. For the 2022 tax year, the standard deduction will increase as follows:

• Married Couples Filing Jointly: The standard deduction will increase by $800, from $25,100 in 2021 to $25,900 in 2022.
• Single Filers and Married Individuals Filing Separately: The standard deduction will rise by $400, from $12,550 in 2021 to $12,950 in 2022.
• Heads of Households: The standard deduction for heads of households will be $19,400 for the 2022 tax year, which is $600 more than the previous year.

Additionally, individuals who are 65 years or older or blind will be eligible for an additional standard deduction of $1,400 in 2022, compared to $1,350 in 2021. If an individual is both 65+ and blind, they can claim two additional deductions.

Tax Rates and Brackets for 2022

While the tax rates for 2022 remain the same as the previous year, the income levels that apply to each rate have increased. Here are the tax rates and brackets for the 2022 tax year:

• Married Filing Jointly and Surviving Spouses:

  See Also

  What are Tax Brackets in the United States?Understanding Federal Tax Brackets for the 2023 and 2024 Tax Years
  • 37% tax rate applies to income over $647,850.
  • 35% tax rate applies to income between $431,900 and $647,850.
  • 32% tax rate applies to income between $340,100 and $431,900.
  • 24% tax rate applies to income between $178,150 and $340,100.
  • 22% tax rate applies to income between $83,550 and $178,150.
  • 12% tax rate applies to income between $20,550 and $83,550.
  • 10% tax rate applies to income up to $20,550 .

• Married Individuals Filing Separately:

  • The tax brackets for married individuals filing separately are generally half of those for married couples filing jointly.

• Single Taxpayers:

  • 37% tax rate applies to income over $539,900.
  • 35% tax rate applies to income between $215,950 and $539,900.
  • 32% tax rate applies to income between $170,050 and $215,950.
  • 24% tax rate applies to income between $89,075 and $170,050.
  • 22% tax rate applies to income between $41,775 and $89,075.
  • 12% tax rate applies to income between $10,275 and $41,775.
  • 10% tax rate applies to income up to $10,275.

• Heads of Households:

  • 37% tax rate applies to income over $539,900.
  • 35% tax rate applies to income between $215,950 and $539,900.
  • 32% tax rate applies to income between $170,050 and $215,950.
  • 24% tax rate applies to income between $89,075 and $170,050.
  • 22% tax rate applies to income between $55,900 and $89,050.
  • 12% tax rate applies to income between $14,650 and $55,900.
  • 10% tax rate applies to income up to $14,650.

It's important to note that these tax rates and brackets are subject to change and may vary based on individual circumstances. Taxpayers should consult the official IRS guidelines or seek professional tax advice for accurate and personalized information.

Other Inflation Adjustments for 2022

In addition to standard deductions and tax rates, several other provisions have been adjusted for inflation to prevent bracket creep. Here are some notable adjustments for the 2022 tax year:

• Maximum Earned Income Tax Credit (EITC): The maximum EITC for 2022 will be $6,935 for taxpayers with three or more qualifying children, compared to $6,728 for tax year 2021.

• Basic Exclusion for Decedents: The basic exclusion for decedents who die in 2022 will be $12,060,000, an increase from $11,700,000 in 2021.

• Annual Gift Exclusion: The annual gift exclusion for calendar year 2022 will be $16,000, up from $15,000 in 2021.

• Maximum Long-Term Capital Gains: The maximum zero rate taxable income amount for long-term capital gains in 2022 will be $83,350 for married couples filing jointly, $55,800 for heads of household, and $41,675 for single filers.

• Alternative Minimum Tax (AMT): The AMT exemption amounts for 2022 are $75,900 for single taxpayers, $118,100 for married couples filing jointly, $59,050 for married individuals filing separately, and $26,500 for estates and trusts. The AMT rates are 26% and 28%, with the 28% rate applying to excess AMTI.

• 2022 Child Tax Credit: Unless Congress takes action, the Child Tax Credit in 2022 will revert back to $2,000 per qualifying child, subject to phaseouts starting at income thresholds of $400,000 for joint filers and $200,000 for single taxpayers. The refundable portion of the Child Tax Credit adjusted for inflation will increase from $1,400 to $1,500 .

These are just a few of the many inflation adjustments made by the IRS for the 2022 tax year. Taxpayers should review the official IRS guidelines or consult a tax professional for comprehensive and personalized information based on their specific circumstances.

Conclusion

The IRS inflation adjustments for 2022 have important implications for taxpayers when filing their taxes in 2023. From changes in standard deductions to tax rates and other provisions, understanding these adjustments is crucial for accurate tax planning and compliance. It's recommended that taxpayers stay informed about the latest IRS guidelines and consult with tax professionals to ensure they are taking full advantage of available deductions and credits while meeting their tax obligations.