Spring is just around the corner, and so is tax season. Each year, the IRS announces new tax brackets, which are updated to account for inflation. While this might sound unfair, it could actually be helpful for your bottom line. As USA Today explains, "[i]f the IRS didn't adjust the federal income tax brackets for inflation you'd likely end up in a higher tax bracket since salaries are often adjusted for inflation."
For tax year 2022, tax rates themselves aren't actually changing. However, there are changes to the tax brackets. This could shift how things look for your taxes this year — specifically, how much you pay on some of your income. If your filing status has changed since last tax year, that could also have an impact.
First, a quick refresher on how income tax brackets work
Before we dive straight into the numbers, let's make sure we're all on the same page as far as how income tax brackets work. Put simply, a tax bracket "is the range of incomes taxed at given rates, which typically differ depending on filing status," explains the Tax Foundation. Filing statuses include single filers, married couples filing jointly, married couples filing separately, and head of household filers, each of which has their own distinct tax brackets.
In the U.S., rates go up the higher someone's income is. So, a person who earns under $10,000 is taxed at a lower rate than someone whose annual taxable income is over $500,000. There are seven different tax brackets in the U.S., starting at 10 percent and topping out at 37 percent.
What are the 2022 income tax brackets and rates?
For 2022 federal income tax returns, the following tax brackets and rates apply:
Single Filers | |
Tax Rate | Taxable income |
10% | Up to $10,275 |
12% | $10,276 to $41,775 |
22% | $41,776 to $89,075 |
24% | $89,076 to $170,050 |
32% | $170,051 to $215,950 |
35% | $215,951 to $539,900 |
37% | Over $539,900 |
Married Couples Filing Jointly | |
Tax Rate | Taxable income |
10% | Up to $20,550 |
12% | $20,551 to $83,550 |
22% | $83,551 to $178,150 |
24% | $178,151 to $340,100 |
32% | $340,101 to $431,900 |
35% | $431,901 to $647,850 |
37% | Over $647,850 |
Married Couples Filing Separately | |
Tax Rate | Taxable income |
10% | Up to $10,275 |
12% | $10,276 to $41,775 |
22% | $41,776 to $89,075 |
24% | $89,076 to $170,050 |
32% | $170,051 to $215,950 |
35% | $215,951 to $323,925 |
37% | Over $332,925 |
Heads of Household | |
Tax Rate | Taxable income |
10% | Up to $14,650 |
12% | $14,651 to $55,900 |
22% | $55,901 to $89,050 |
24% | $89,051 to $170,050 |
32% | $170,051 to $215,950 |
35% | $215,951 to $539,900 |
37% | Over $539,900 |
How will tax brackets change for 2023?
There are some major shifts ahead for tax year 2023. Kiplinger reports that because "inflation has been high over the past year or so, the inflation adjustments impacted tax brackets more this year than what most of us are used to."
The changes impact the width of individual tax brackets, which means the difference between the lowest and highest dollar amounts within a tax bracket. For the upcoming tax year, "the width of the 22 percent singles bracket grew by more than twice as much," Kiplinger notes, explaining that the "2023 bracket covers $50,649 of taxable income ($95,375 – $44,726 = $50,649), which is $3,350 wider than for 2022."
This widening of the brackets is actually good news — it means there's a lower chance that those whose income either remains the same or doesn't keep pace with inflation will end up in a higher tax bracket next year.
Can you lower your tax bracket?
It certainly is possible to lower your tax bracket, and there are a number of ways you can go about doing it. This includes:
- Filing under a different status: According to USA Today, how you file could affect which tax bracket you qualify for: "If you're married, filing a joint return with your spouse could qualify you for a lower tax bracket. Or depending on your income and circumstances, you may lower your tax bracket by filing an individual return."
- Contributing to a 401(k) or IRA: You may also lower your tax bracket by contributing to a 401(k) plan, as your contributions will lower your taxable income. Contributing to an IRA could also allow you to secure a tax deduction, which could help with lowering your tax bracket.
- Looking at the effect of standard vs. itemized deductions: USA Today also advises calculating how taking the standard deduction as opposed to itemized deductions shifts things, "since it could put you in a lower bracket, depending on your financial situation."
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week. This article is in part based on information first published on The Week's sister site, Kiplinger.com
New Tax Rules for 2023: Download your free issue of The Kiplinger Tax Letter today. No information is required from you.
