What are the Tax Brackets and Federal Income Tax Rates for the 2021-2022 Tax Years?
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Income tax has always been a challenge to deal with financially as it eats into your capital gains and profits and makes your earnings less valuable. However, every law-abiding citizen has to pay tax no matter if they belong to the working class, have a high-net-worth, an investor, or an inheritor or beneficiary of an estate. It is mandatory and not something you can get away with. Thus, it is in your best interest to know its rules, rates, and implications.
The federal US government primarily levies
income tax. The federal income tax rate can differ each year and is decided
after taking into consideration various factors. Each year new federal tax
brackets are announced by the Internal Revenue Services (IRS) after adjusting
them with respect to inflation. In addition, the IRS also revises the
allowances, deductions, and thresholds every year.
The United States levies tax on all citizens
and residents of the country. Additionally, some states also levy a state tax.
The tax charged is directly proportional to your income meaning the higher your
income, the higher the tax rate you will have to pay. The United States has a
progressive tax system wherein in addition to paying a higher tax on higher
income, the tax rates are applicable to only the part of your income that
exceeds the threshold and not the whole amount. For example, say your income
falls in the tax bracket of $40,526 to $86,375 where you must pay a straight
22% tax. Herein, you will have to pay 12% (previous tax bracket) on the amount
up to $40,525 and 22% on the amount over $40,526. It is advised that you consult with a professional
financial advisor who can suggest tax-saving strategies based
on the tax bracket you fall in.
What is the federal income tax rate?
The federal income tax rate is determined as
per the taxpayer’s filing status and comprises four categories. These are:
- Single filers
- Married filers filing jointly
- Married filers filing separately
- Head of household
Let us look at the 2021 and 2022 federal income tax brackets:
(Please note that the 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)
Single
filers
| 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 $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 |
Married filers filing jointly
| 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 |
Married filers filing separately
| 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 higher | $84,496.75 + 37% on the amount over $314,150 |
Head of household
| 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)
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% | $4,807.50 + 22% on the amount over $41,775 | $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 | $89,051 to $170,050 |
| 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 compute your taxability by using a federal income tax rate calculator at the time of filing your taxes.
What is meant by the Alternative Minimum Tax (AMT)?
AMT refers to a special tax levied on
high-income individuals wherein a ceiling is placed on the percentage of taxes
that a filer must pay to the government irrespective of the number of
deductions claimed by the taxpayer. Under the AMT, individuals have to
calculate their tax twice by using a federal income tax rate calculator. First,
you must calculate your tax under the normal tax system given above and the
second time as per AMT. The final tax to be paid will be the higher of the two
taxes calculated as per the two tax systems.
Say, your AMT tax comes out higher than
ordinary tax, in this situation, you will have to comply with two tax rates 26%
and 28%. The IRS allows you to claim an exemption in this scenario. For 2022,
you can file a claim for 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
- $26,500 for trusts and estates
AMT
tax brackets 2022
| Taxable income bracket | 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 tax rates differ on the taxable income and the filing status. The tax rates for 2022 are as follows:
1. Single filers
| Taxable income brackets | Tax rate |
| 0% | Up to $41,675 |
| 15% | $41,676 to $459,750 |
| 20% | Over $459,750 |
2. Married filers filing jointly
| Taxable income brackets | Tax rate |
| 0% | Up to $83,350 |
| 15% | $83,351 to $517,200 |
| 20% | Over $517,200 |
3. Married filers filing separately
| Taxable income brackets | Tax rate |
| 0% | Up to $41,675 |
| 15% | $41,676 to $258,600 |
| 20% | Over $258,600 |
4. Head of household
| Taxable income brackets | Tax rate |
| 0% | Up to $55,800 |
| 15% | $55,801 to $488,500 |
| 20% | Over $488,500 |
We have covered the federal tax brackets for
2022. However, apart from this, you should also know and understand the
deductions and credits available to you that can help minimize your tax
liability for the year.
What is the standard deduction for the present federal income tax rate for 2022?
Standard deduction means the sum that can be deducted from your gross income without you having to furnish any proof of investment. This is a standard amount that is deducted for all taxpayers. Let us look at the standard deduction limits for 2022:
- Single
filers: For 2022, the standard deduction for single
filers has been set at $12,950. Compared to 2021, it is an increase of $400
from $12,550. - Married
filers filing jointly: The standard deduction for married filers
filing jointly has been fixed at $25,900 in 2022. Compared to 2021, it is an
increase of $800 from $25,100. - 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 has been kept at $19,400 in 2022. This is a $600 increase from
$18,800 in 2021.
The elderly and those suffering from
disabilities have been afforded some other standard deduction provisions. These
are:
- For 2022, all taxpayers aged 65 or older can
claim a standard deduction of $1,400, up from $1,350 in 2021. - For 2022, all taxpayers who suffer from
blindness can claim a standard deduction of $1,400, up from $1,350 in 2021. - From 2022 onwards, all taxpayers aged 65 or
older who suffer from blindness can claim both standard deductions.
What is meant by the Earned Income Tax Credit (EITC) for 2022?
EITC refers to a refundable tax credit that
can be claimed by low and moderate-income groups on their income tax return. To
avail of this tax credit, the individual must have at least $1 as earned income
for the financial year. Moreover, EITC is exclusive of income earned from
pension or unemployment benefits. In addition, you must also have an investment
income of $10,000 or lower. For 2022, the EITC is as follows:
Let us
find out 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 Adjusted Gross Income (AGI) for single 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?
It is a tax break given to American taxpayers
for each qualifying dependent child. In 2021, the tax credit was $3,000
(children under age 18) or $3,600 (children under age 6) per eligible child
however this may be reverted to $2000 for each qualifying child for 2022. This
is applicable for married joint filers having an income of $400,000 and single
filers having an income of $200,000. Do note that married joint filers will not
be eligible to receive any credit at $440,000. In order to qualify, your child
must be born by the end of 2022 and be dependent on you in 2022 itself.
What is the maximum allowable exclusion for gifts in 2022?
A gift can refer to any financial asset,
property, cash, or otherwise, given to someone without receiving anything of
comparable fair market value in return.
Each year the taxable limit for gifts is revised. For 2022, you can gift
$16,000 without being taxed which is an increase of $1,000 over the previous
year. You could gift up to $15,000 in gifts in 2021 without having to pay any
tax on it. If you are giving a gift to your spouse, you can give them $164,000
without paying any tax. In 2021, the limit was set at $159,000 for the same.
There is also a lifetime gift exclusion limit. For 2022, it was fixed at $12.06
million for individuals and $24.12 million for married couples. If you exceed
the said limits, you could end up paying a gift tax ranging between 18% and
40%.
To
conclude
As stated above, each year the federal income
tax rates are revised. It is important to keep up with the new modifications
when filing your taxes or claiming tax deductions. These changes are made on
the basis of the prevalent rate of inflation by the IRS. You can minimize your
tax liability by deploying tax-saving strategies and making use of a federal
income tax rate calculator to avoid making any errors.
Use the free advisor match service
to connect with a professional financial advisor who can help you reduce your
tax liability, manage your finances, employ effective tax-saving strategies and
help build a retirement nest egg. Answer a few simple questions about yourself
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