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  • Writer's pictureHoyt, Filippetti & Malaghan, LLC

Updated Tax Brackets and Other Changes for 2022

The 2021 tax season may be behind us, but it’s not too late to start thinking about this current tax year. The IRS has released updated tax brackets, standard deductions, and other updates to keep in mind as you plan for 2022 taxes.

Tax brackets

Tax brackets for 2022 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top tax rate of 37% has not changed from 2021, but the other income ranges have been updated.

The chart below shows the tax brackets for 2022.

Standard Deductions

The 2022 standard deduction amounts have increased to the amounts below:

  • $12,950 for single filers and married couples filing separately

  • $19,400 for heads of households

  • $25,900 for married couples filing jointly and surviving spouses

  • $1,400 additional standard deduction for blind and older taxpayers (amount increases to $1,750 if the individual is unmarried and not a surviving spouse)

Individual Tax Credits

There have also been some changes to individual tax credits.

  • The Child Tax Credit gained a lot of attention in 2021 with prepayments and opt outs. In 2022, the credit will revert to $2,000 per child with income phase-outs for taxpayers earning $200,000 to $440,000 per year. Taxpayers with income over $440,000 will not receive the credit.

  • The qualified adoption expenses credit and the credit for the adoption of a special needs child will go up to $14,890 for 2022.

  • The foreign earned income credit exclusion will increase from $108,700 to $112,000 in 2022.

Capital Gains

The maximum zero rate on adjusted net capital gains for 2022 is $83,350 for married couples filing jointly, $41,675 for married couples filing separately, $55,800 for head of household filers, and $41,675 for single filers.

For 2022, the 15% rate amount applies to adjusted net capital gains for single returns of up to $459,750, married filing separately returns of $258,600, married filing jointly returns of $517,200, and head of household returns of up to $488,500. Above these income ceilings, the applicable capital gains rate is 20%.

Retirement Plans

Retirement plan contribution limitations and phase-out ranges will also increase. The 2022 income exclusion for employee retirement plan contributions is $20,500. Catch-up contributions for employees who are 50 years old or older remains $6,500 and the SIMPLE retirement account limitation is $14,000.

For 2022, phase-out ranges for Individual Retirement Accounts (IRAs) are $0 to $10,000 for married active contributors filing separately, $68,000 to $78,000 for active participants in an employer retirement plan, $109,000 to $129,000 for joint returns, and $204,000 to $214,000 for IRA contributors not actively participating in another plan.

Medical Savings Accounts, Estates, and Fringe Benefits

The threshold for participants in medical savings accounts (known commonly as HSA accounts) also increased for 2022. For self-coverage, the threshold is between $2,450 and $3,700 with a maximum out-of-pocket expense of $4,950. For family coverage, the 2022 threshold is between $4,950 and $7,400 with a maximum out-of-pocket expense of $9,050. The maximum HSA contribution for a self-only plan is $3,650 and the maximum for a family plan is $7,300. Both plans offer a catch-up contribution of $1,000 for taxpayers age 55 or older.

The maximum salary reduction contribution to flexible spending accounts (FSAs) is $2,850 and the maximum carryover amount increased to $570 for 2022.

The estate tax exemption level increased to $12.06 million for 2022 and the annual gift tax exclusion increased to $16,000. Parking fringe benefits and monthly transportation limits are $280 for 2022.

Awareness of the IRS’s tax changes can help ease the process of tax planning for 2022.

If you have questions, contact HFM today. Our professionals are well versed on the latest issues to provide our clients with professional, personalized services.

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