2021-2022 Tax Brackets and Federal Income Tax Rates
Income tax has always been a sore point for the working class, high-net worth individuals, investors, as well as any inheritors or beneficiaries of an estate. Tax can render your earnings less valuable and eat into your capital gains and profits. However, no matter how much you despise it, it is mandatory and not something you can get away with. Hence, knowing its rules, rates, and implications is essential.
Income tax is primarily levied by the federal US government and the federal income tax rate can differ each year based on a host of factors. The Internal Revenue Services (IRS) announces federal tax brackets every year after adjusting them with respect to inflation. The IRS also decides the allowances, deductions, and thresholds for each year.
All residents and citizens of the United States are taxed. Additionally, some states may also charge a state tax. The tax charged is directly proportional to your income. So, the higher the income, the higher the tax rate. America has a progressive tax system. This means that not only do you pay a higher tax on higher income, but the tax rates are applied to only the portion that exceeds the threshold and not the whole amount. For instance, if you fall in the tax bracket of $19,901 to $81,050 that levies a tax rate of 12%, you will not pay a straight 12% tax. You will pay 10% (previous tax bracket) on the amount up to $19,900 and 12% on the amount over $19,900. To understand the federal tax rates (the tax bracket you fall in) and how you can minimize your tax payments, consult with a professional financial advisor who can guide you on the same.
What is the federal income tax rate?
It is important to understand that the federal income tax rate is determined as per the taxpayer’s filing status.
There are four categories that determine the tax payer’s filing status in the US:
- Single filers
- Married filers filing jointly
- Married filers filing separately
- Head of household
Here are the 2021 and 2022 federal income tax brackets:
(2021 tax brackets are provided for those filing taxes in April 2022 or in October 2022, with an extension)
2021 federal income tax brackets
(For taxes due in Apr 2022 or in Oct 2022 with an extension)
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $9,950 |
10% |
|
12% |
$9,951 to $40,525 |
$995 + 12% on the amount over $9,950 |
|
22% |
$40,526 to $86,375 |
$4,664 + 22% on the amount over $40,525 |
|
24% |
$86,376 to $164,925 |
$14,751 + 24% on the amount over $86,375 |
|
32% |
$164,926 to $209,425 |
$33,603 + 32% on the amount over $164,925 |
|
35% |
$209,426 to $523,600 |
$47,843 + 35% on the amount over $209,425 |
|
37% |
$523,601 or higher |
$157,804.25 + 37% on the amount over $523,600 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $19,900 |
10% on taxable income |
|
12% |
$19,901 to $81,050 |
$1,990 + 12% on the amount over $19,900 |
|
22% |
$81,051 to $172,750 |
$9,328 + 22% on the amount over $81,050 |
|
24% |
$172,751 to $329,850 |
$29,502 + 24% on the amount over $172,750 |
|
32% |
$329,851 to $418,850 |
$67,206 + 32% on the amount over $329,850 |
|
35% |
$418,851 to $628,300 |
$95,686 + 35% on the amount over $418,850 |
|
37% |
$628,301 or more |
$168,993.50 + 37% on the amount over $628,300 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $9,950 |
10% on taxable income |
|
12% |
$9,951 to $40,525 |
$995 + 12% on the amount over $9,950 |
|
22% |
$40,526 to $86,375 |
$4,664 + 22% on the amount over $40,525 |
|
24% |
$86,376 to $164,925 |
$14,751 + 24% on the amount over $86,375 |
|
32% |
$164,926 to $209,425 |
$33,603 + 32% on the amount over $164,925 |
|
35% |
$209,426 to $314,150 |
$47,843 + 35% on the amount over $209,425 |
|
37% |
$314,151 or more |
$84,496.75 + 37% on the amount over $314,150 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $14,200 |
10% on taxable income |
|
12% |
$14,201 to $54,200 |
$1,420 + 12% on the amount over $14,200 |
|
22% |
$54,201 to $86,350 |
$6,220 + 22% on the amount over $54,200 |
|
24% |
$86,351 to $164,900 |
$13,293 + 24% on the amount over $86,350 |
|
32% |
$164,901 to $209,400 |
$32,145 + 32% on the amount over $164,900 |
|
35% |
$209,401 to $523,600 |
$46,385 + 35% on the amount over $209,400 |
|
37% |
$523,601 or more |
$156,355 + 37% on the amount over $523,600 |
2022 federal income tax brackets:
(2022 federal income tax brackets for those filing taxes in April 2023)
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $10,275 |
10% on taxable income |
|
12% |
$10,276 to $41,775 |
$1,027.50 + 12% on the amount over $10,275 |
|
22% |
$41,776 to $89,075 |
$4,807.50 + 22% on the amount over $41,775 |
|
24% |
$89,076 to $170,050 |
$15,213.50 + 24% on the amount over $89,075 |
|
32% |
$170,051 to $215,950 |
$34,647.50 + 32% on the amount over $170,050 |
|
35% |
$215,951 to $539,900 |
$49,335.50 + 35% on the amount over $215,950 |
|
37% |
$539,901 or more |
$162,718 + 37% on the amount over $539,900 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $20,550 |
10% on taxable income |
|
12% |
$20,551 to $83,550 |
$2,055 + 12% on the amount over $20,550 |
|
22% |
$83,551 to $178,150 |
$9,615 + 22% on the amount over $83,550 |
|
24% |
$178,151 to $340,100 |
$30,427 + 24% on the amount over $178,150 |
|
32% |
$340,101 to $431,900 |
$69,295 + 32% on the amount over $340,100 |
|
35% |
$431,901 to $647,850 |
$98,671 + 35% on the amount over $431,900 |
|
37% |
$647,851 or more |
$174,253.50 + 37% on the amount over $647,850 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $10,275 |
10% on taxable income |
|
12% |
$10,276 to $41,775 |
$1,027.50 + 12% on the amount over $10,275 |
|
22% |
$41,776 to $89,075 |
$4,807.50 + 22% on the amount over $41,775 |
|
24% |
$89,076 to $170,050 |
$15,213.50 + 24% on the amount over $89,075 |
|
32% |
$170,051 to $215,950 |
$34,647.50 + 32% on the amount over $170,050 |
|
35% |
$215,951 to $323,925 |
$49,335.50 + 35% on the amount over $215,950 |
|
37% |
$323,926 or more |
$87,126.75 + 37% on the amount over $323,925 |
|
Federal income tax rate |
Taxable income brackets |
Tax |
|
10% |
$0 to $14,650 |
10% on taxable income |
|
12% |
$14,651 to $55,900 |
$1,465 + 12% on the amount over $14,650 |
|
22% |
$55,901 to $89,050 |
$6,415 + 22% on the amount over $55,900 |
|
24% |
$89,051 to $170,050 |
$13,708 + 24% on the amount over $89,050 |
|
32% |
$170,051 to $215,950 |
$33,148 + 32% on the amount over $170,050 |
|
35% |
$215,951 to $539,900 |
$47,836 + 35% on the amount over $215,950 |
|
37% |
$539,901 or more |
$161,218.50 + 37% on the amount over $539,900 |
You can use a federal income tax rate calculator to compute your taxability when filing your taxes.
What is the Alternative Minimum Tax (AMT)?
AMT is a special tax that is levied on high-income individuals. Under the AMT, individuals earning a certain amount of income have to calculate their tax twice. This can be done by using a federal income tax rate calculator. If you are a high-net worth individual, you will have to calculate your tax under the normal tax system given above and once as per AMT the second time. The final tax to be paid will be the higher of the two.
If your AMT tax is higher than ordinary tax, you will pay tax as per two tax rates 26% and 28%. However, there is an exemption here. For 2022, you can claim a taxable income exemption on AMT for income of up to:
- $75,900 for single filers
- $59,050 for married filers filing separately
- $118,100 for married filers filing jointly
- $75,900 for the head of household
- In addition to this, trusts and estates can also claim an exemption of up to $26,500
AMT tax brackets 2022
|
Taxable income brackets |
AMT |
|
More than $206,100 for all taxpayers |
28% |
|
More than $103,050 for married filers filing separately |
28% |
|
Lower than $206,100 for all taxpayers |
26% |
|
Lower than $103,050 for married filers filing separately |
26% |
What is the tax charged on long-term capital gains?
Long-term capital gains rates for 2022 will vary on the taxable income and the filing status. Here's how it will be levied:
|
Taxable income brackets |
Tax rate |
|
0% |
Up to $41,675 |
|
15% |
$41,676 to $459,750 |
|
20% |
Over $459,750 |
|
Taxable income brackets |
Tax rate |
|
0% |
Up to $83,350 |
|
15% |
$83,351 to $517,200 |
|
20% |
Over $517,200 |
|
Taxable income brackets |
Tax rate |
|
0% |
Up to $41,675 |
|
15% |
$41,676 to $258,600 |
|
20% |
Over $258,600 |
|
Taxable income brackets |
Tax rate |
|
0% |
Up to $55,800 |
|
15% |
$55,801 to $488,500 |
|
20% |
Over $488,500 |
Now that you know the federal tax brackets for 2022, you must also know the deductions and credits available to you that can help lower your taxability for the year.
What is the standard deduction for the current federal income tax rate for 2022?
The standard deduction refers to the amount that can be deducted from your gross income without showing any investment proof. This is a standard amount that is deducted for all taxpayers. Here are the standard deduction limits for 2022:
- Single filers: The standard deduction for single filers in 2022 has been fixed at $12,950. This is a $400 jump from $12,550 in 2021.
- Married filers filing jointly: The standard deduction for married filers filing jointly is $25,900 in 2022. This was $25,100 in 2021 and has seen an increase of $800.
- Married filers filing separately: The standard deduction for married filers filing separately is the same as single filers, i.e., $12,950.
- Head of household: The standard deduction for the head of household in 2022 is $19,400, a $600 increase from $18,800 in 2021.
In addition to these limits, here are some other standard deduction provisions for the elderly and those with disabilities:
- Taxpayers aged 65 or older can claim a standard deduction of $1,400. This was $1,350 in 2021.
- Taxpayers who suffer from blindness can claim a standard deduction of $1,400. This was $1,350 in 2021.
- Tax payers aged 65 or older who suffer from blindness can claim both standard deductions.
What is the Earned Income Tax Credit (EITC) for 2022?
EITC is a refundable tax credit that low and moderate-income groups can claim on their income tax return. In order to claim this tax credit, you must have at least $1 as earned income for the financial year. This is exclusive of income earned from pension or unemployment benefits. Additionally, you should also have an investment income of $10,000 or lower. For 2022, the EITC is as follows:
Here is the EITC for taxes due in April 2022 or in October 2022 after the extension:
|
Number of children in a family |
Maximum earned income tax credit |
Maximum Adjusted Gross Income (AGI) for single filers |
Maximum AGI for the head of household |
Maximum AGI for married joint filers |
|
No children |
$1,502 |
$21,430 |
$21,430 |
$27,380 |
|
1 child |
$3,618 |
$42,158 |
$42,158 |
$48,108 |
|
2 children |
$5,980 |
$47,915 |
$47,915 |
$53,865 |
|
3 or more children |
$6,728 |
$51,464 |
$51,464 |
$57,414 |
Here is the EITC for taxes due in April 2023:
|
Number of children in a family |
Maximum earned income tax credit |
Maximum AGI, single or head of household filers |
Maximum AGI for the head of household |
Maximum AGI for married joint filers |
|
No children |
$560 |
$16,480 |
$16,480 |
$22,610 |
|
1 child |
$3,733 |
$43,492 |
$43,492 |
$49,622 |
|
2 children |
$6,164 |
$49,399 |
$49,399 |
$55,529 |
|
3 or more children |
$6,935 |
$53,057 |
$53,057 |
$59,187 |
What is the child tax credit for 2022?
The child tax credit may be switched back to $2000 for each qualifying child. This is for income of $400,000 for married joint filers and $200,000 for single filers. Joint filers will receive no credit at $440,000. However, the child should be born by the end of 2022 and be dependent on you in 2022.
What is the maximum exclusion for gifts in 2022?
In 2021, you could give $15,000 in gifts without being taxed. In 2022, this has been increased to a limit of $16,000. If you are gifting a spouse, you can give up to $164,000 without paying any tax. This was previously $159,000 in 2021. The total lifetime gift exclusion in 2022 is $12.06 million for individuals and $24.12 million for married couples. Gift tax levied on exceeding these amounts can range between 18% and 40%.
A gift can be any financial asset, cash or otherwise, that you give someone with nothing in return equivalent to its fair market value.
To summarize
The current federal income tax rate for 2022 is different from 2021 in many ways. So, make sure to make a note of all the modifications when filing your taxes or claiming tax deductions. The IRS makes these changes based on the rate of inflation, and there are several tax savings strategies that you can use to lower your tax liability based on your unique situation. You can use a federal income tax rate calculator to avoid making any errors.
To get in touch with a fiduciary advisor who can help you plan for your retirement, manage your finances, and help reduce your tax liability with effective tax saving strategies, use the free advisor match service. Answer a few simple questions about yourself and the match tool will help connect you to 1-3 financial advisors based on your financial requirements.
