The IRS Is Adjusting 2022 Standard Deductions Due to Inflation: What That Means to You?

The Internal Revenue Service announced in a Wednesday statement that it is boosting federal tax brackets for 2022 due to faster inflation, including increases in standard deductions.

The agency usually adjusts tax brackets each year to account for rising consumer prices, though this year's increases will see greater adjustments than what's been typical in recent years.

Dollars and bank account book on table.
The IRS announced an increase in standard deductions for taxpayers this week. Above, this undated stock image shows U.S. dollars, a bank account book and calculator on a table. iStock

The standard deduction for married couples filing jointly will rise 3.2 percent to $25,900 next year, an increase of $800 from the prior year. The standard deduction for single taxpayers and married individuals filing separately rises to $12,950 for tax year 2022, up $400 from tax year 2021. For heads of households, the standard deduction will be $19,400, up $600.

Last year's tax bracket income thresholds increased by about 1 percent from the prior year; in 2022, the new bracket will thresholds will see an increase of around 3 percent.

Below is a breakdown of the new thresholds for the seven tax brackets in 2022.

  • 10 percent tax bracket: Single individuals earning up to $10,275 and married couples filing jointly earning up to $20,550.
  • 12 percent tax bracket: Single filers earning more than $10,275 and married couples filing jointly earning over $20,550.
  • 22 percent tax bracket: Single filers earning more than $41,775 and married couples filing jointly earning over $83,550.
  • 24 percent tax bracket: Single filers earning more than $89,075 and married couples filing jointly earning over $178,150.
  • 32 percent tax bracket: Single filers earning more than $170,050 and married couples filing jointly earning over $340,100.
  • 35 percent tax bracket: Single filers earning more than $215,950 and married couples filing jointly earning over $431,900.
  • 37 percent tax bracket: Single filers earning more than $539,900 and married couples filing jointly earning over $647,850.

The IRS said basic income tax rates won't be changing in 2022. Those rates—with the lowest threshold at 10 percent and the highest at 37 percent—were set by Congress under the 2017 Tax Cuts and Jobs Act.

The agency also noted the personal exemption will remain at $0, the same as it was in 2021. (The personal exemption was also eliminated in the Tax Cuts and Jobs Act.)

The Alternative Minimum Tax exemption amount for tax year 2022 will be $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). For the prior year, the exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).

The maximum Earned Income Tax Credit for qualifying taxpayers who have three or more qualifying children will also increase for tax year 2022 to $6,935, up from $6,728 for tax year 2021.

According to the statement from the IRS, the annual exclusion for gifts will also increase by $1,000 to $16,000 from $15,000 for calendar year 2021.