What new tax bracket changes will take place in 2022?
Jan 11, 2022
The arrival of the 2022 tax season will introduce taxpayers to several new changes. While income tax rates are remaining the same, as they have since 2018, the brackets into which each individual or married filing jointly taxpayer falls may not be the same as it was last year. Adjustments to account for inflation have shifted quite a few numbers for the 2022 tax season, so taxpayers should take another look at where they fall under the new tax brackets with a CERTIFIED FINANCIAL PLANNER™ professional.
What are the biggest new tax bracket changes for 2022?
One of the most notable changes for 2022 is the top tax bracket. While the top federal tax rate will remain at 37%, the level of taxable income at this bracket has been increased. This year, married couples filing jointly will not reach the top tax bracket until they reach an income level of $647,851. This is an increase of just under $20,000 from the previous year.
As a quick reminder, income tax is not intended to be charged at a flat rate for your entire income. Rather, the brackets are intended to only apply to the income that falls within a certain range. For example, imagine you are a single person with an income of $50,000. The income tax bracket for incomes between $41,776 to $89,075 is 22%.
That does not mean that you will have to pay 22% of $50,000. Rather, the amount of income you earn within this tax bracket will be charged 22%, while the rest of your income will be charged accordingly. So, out of your $50,000, only $8,224 of that income will be taxed at 22%.
With this new change in the top federal tax rate, higher income taxpayers will see less of their income falling under the 37% tax rate. All the federal income ranges will be experiencing tax bracket changes in 2022.
What other new changes will affect taxpayers in 2022?
Aside from the new tax bracket changes, taxpayers can expect to see the following changes:
- The new standard deduction for married couples filing jointly will be $800 higher than it was in 2021.
- The maximum contribution to a flexible spending account, or FSA, will be $100 higher than it was in 2021.
- The maximum contribution toward a 401(k) for taxpayers under 50 will be $1,000 higher than it was in 2021.
Talk to a ProVise CFP® professional about your 2022 new tax bracket changes
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about the new changes to federal tax law and how they might affect you? Contact ProVise today to schedule a complimentary consultation.