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 paying it, it is mandatory and not something you can get away with. Hence, knowing the rules, rates, and implications of income tax is essential.
The federal US government primarily levies income tax, and the federal income tax rate can differ each year based on a host of factors. The Internal Revenue Service (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 you pay a higher tax on higher income, and 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 $10,276 to $41,775 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 $10,276 and 12% over $10,276. 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 by the taxpayer’s filing status.
There are four categories that determine the taxpayer’s filing status:
- Single filers
- Married filers filing jointly
- Married filers filing separately
- Head of household
Here are the 2022 federal income tax brackets:
(2022 federal income tax brackets for those filing taxes in April 2023)
Single filers
| 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 |
Married filers filing jointly
| 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 |
Married filers filing separately
| 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 |
Head of household
| 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 taxes 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 taxes being filed by April 2023, 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 in 2022
| Taxable income brackets | AMT |
| Excess alternative minimum taxable income of $206,100 or more for all taxpayers | 28% |
| $103,050 for married filers filing separately | 28% |
| Lower than $$206,100 for all taxpayers | 26% |
| Lower than $103,050 for married filers filing separately | 26% |
What is the tax charged on long-term capital gains?
Long-term capital gains rates for 2022 will vary on the taxable income and the filing status. Here’s how it will be levied:
Single filers
|
Taxable income brackets |
Tax rate |
| 0% | Up to $41,675 |
| 15% | $41,676 to $459,750 |
| 20% | Over $459,750 |
Married filers filing jointly
| Taxable income brackets | Tax rate |
| 0% | Up to $83,350 |
| 15% | $83,351 to $517,200 |
| 20% | Over $517,200 |
Married filers filing separately
| Taxable income brackets | Tax rate |
| 0% | Up to $41,675 |
| 15% | $41,676 to $258,600 |
| 20% | Over $258,600 |
Head of household
| Taxable income brackets | Tax rate |
| 0% | Up to $55,800 |
| 15% | $55,801 to $488,500 |
| 20% | Over $488,500 |
Now that you know the federal tax brackets for long-term capital gains rates for 2022-23, you must also know the deductions and credits available to you that can help lower your taxability for the year.
What is the standard deduction for the current federal income tax rate for 2022-23?
The standard deduction refers to the amount that can be deducted from your gross income without showing any investment proof. This is a standard amount that is deducted from all taxpayers. Here are the standard deduction limits for 2022-2023:
- Single filers: The standard deduction for single filers has been fixed at $12,950 in 2022 payable by April 2023.
- Married filers filing jointly: The standard deduction for married filers filing jointly is $25,900 in 2022 payable by April 2023.
- Married filers filing separately: The standard deduction for married filers filing separately is the same as single filers, i.e., $12,950.
- Head of household: The standard deduction for the head of household is $$19,400 payable by April 2023.
In addition to these limits, here are some other standard deduction provisions for the elderly and those with disabilities:
- Taxpayers (married filing jointly or married filing separately) aged 65 or older or blind can claim a standard deduction of $1,400.
- Taxpayers (single or head of household) aged 65 or older or blind can claim a standard deduction of $1,750.
What is the Earned Income Tax Credit (EITC) for 2022-23?
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 2022-23, the EITC is as follows:
Here is the EITC for 2022-23 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 widowed | Maximum AGI for married joint filers |
| No children | $560 | $16,480 | $16,480 | $16,480 | $22,610 |
| 1 child | $3,733 | $43,492 | $43,492 | $43,492 | $49,622 |
| 2 children | $6,164 | $49,399 | $49,399 | $49,399 | $55,529 |
| 3 or more children | $6,935 | $53,057 | $53,057 | $53,057 | $59,187 |
What is the child tax credit for 2022-23?
Single taxpayers filing with an AGI of less than $200,000 and married taxpayers filing separately with an AGI of less than $400,000 are eligible for the Child Tax Credit in 2022. The maximum child tax credit per qualifying child is $2,000 for children aged 5 and under. The credit limit is increased to $3,000 for children between the ages of 6 and 17.
What is the maximum exclusion for gifts in 2022-23?
For taxes to be filed in April 2023, you can give $16,000 in gifts without being taxed. If you are gifting a non-citizen spouse, you can give up to $164,000 without paying any tax. 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 conclude
There have been many changes in the tax rates for 2022. 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 financial 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 matching tool will help connect you to 1-3 financial advisors based on your financial requirements.
