Every year, the Internal Revenue Service (IRS) adjusts many provisions to account for the impact of inflation, and for most Americans this usually means a change in the U.S. federal income tax brackets.
And for tax filers looking to get ahead of the due date for their 2022 tax returns, it’s worth considering the new tax brackets to see how they affect you.
When it comes to federal income tax, the tax rates didn’t change from 2021 to 2022, ranging from 10 to 37 percent.
However, how much you need to earn to be taxed a higher percentage from January 1 to December 31, known as the tax brackets, change each new tax year, with taxes for 2022 due on April 18, 2023.
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American incomes are taxed at a marginal rate, which means you pay each percentage rate for the amount of your income that falls into that specific range.
Federal Income Tax Brackets 2022
The taxable income rate for single filers earning up to $10,275 is 10 percent, and for joint married filers is 10 percent tax on income up to $20,550.
Income between $10,276 to $41,775 for single filers, and $20,551 to $83,550 for joint filers is taxed at 12 percent.
There is a 22 percent tax applied to income between $41,776 to $89,075 for single filers, and $83,551 to $178,150 for joint filers.
The tax rate for income earned between $89,076 to $170,050 for single tax filers and $178,151 to $340,100 for joint tax filers is 24 percent.
Income tax rates for earnings between $170,051 to $215,950 for single and $340,101 to $431,900 for joint filers is set at 32 percent.
There is a 35 percent tax rate applied to earnings between $170,051 to $215,950 for single filers and $340,101 to $431,900 for joint filers.
And, income earned over $539,900 for single tax filers and over $647,850 for joint filers is taxed at a 37 percent rate.
What Are the 2023 Income Tax Brackets?
The IRS usually provides the tax brackets for the upcoming year in late October or early November.
The percentage rates won’t change for 2023, but the brackets will likely be adjusted again for inflation. If inflation continues to rise, you should expect the brackets will get wider.
This is typically a good thing for most Americans, as it means you are less likely to find yourself in a higher tax bracket if your income stays flat or doesn’t increase at the rate of inflation from one year to the next.
How to Get Into a Lower Tax Bracket?
There are still things you can do to adjust your salary if you are on the boundary for the higher tax bracket.
One of the best ways to avoid jumping into a higher tax bracket is by investing in your retirement. Putting money into a traditional retirement fund (IRA) or 401(k) account can reduce your taxable income as contributions up to a certain limit are made on a pre-tax basis, which means what you put in doesn’t count as income.
You should also take advantage of any deductions you’re entitled to claim, such as write-offs for medical expenses, state and local taxes, mortgage interest, gifts to charity, and more.
“Deductions, write-offs and other ways to reduce your taxable income are built right into U.S. tax codes. It’s not just legal to use these strategies; it’s a smart money move,” Andy Rosen, taxes and investing specialist at personal finance app NerdWallet, told Newsweek.
“That said, you have to make sure you’re calculating these properly, as carelessness or dishonesty can lead to audits or penalties.
“If you’re primarily working as a freelancer, you’ll want to keep careful records of both your income and your expenses related to work.
Companies don’t always withhold taxes on payments they make to outside contractors, so it’s up to you to tell the IRS what you made. But this also offers an opportunity to offset your income by writing off expenses for things you need to do your job. Internet costs and office supplies are a few examples.”
