IRS Announces Inflation Adjustments for 2022
The Internal Revenue Service has announced the annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Below are some of the tax items of greatest interest to our clients:
Marginal rates: For 2022, the top tax rate remains at 37%. The rates are as follows:
- 35% for incomes over $215,950 ($431,900 for married couples filing jointly)
- 32% for incomes over $170,050 ($340,100 for married couples filing jointly)
- 24% for incomes over $89,075 ($178,150 for married couples filing jointly)
- 22% for incomes over $41,775 ($83,550 for married couples filing jointly)
- 12% for incomes over $10,275 ($20,550 for married couples filing jointly)
- 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly)
The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900, up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
The Alternative Minimum Tax exemption for tax year 2022 is $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).
Child Tax Credit. Without congressional action on the Build Back Better Act, in 2022, the Child Tax Credit would revert back to $2,000 per qualifying child, subject to income phaseouts starting at $400,000 for joint filers and $200,000 for singles. Joint filers with $440,000 of income get no credit.
Unified credit against estate tax: Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000 up from a total of $11,700,000 for estates of decedents who died in 2021.
The annual exclusion for gifts: The exclusion will increase by $1,000 to $16,000 for calendar year 2022.
Sec. 199A deduction for qualified business income: The 2022 threshold amount is $340,100 for married couples filing jointly, $170,050 for married individuals filing separately, and $170,050 for all others. The phase-in range amount is $440,100 for married couples filing jointly, $220,050 for married individuals filing separately, and $220,050 for all others.
Questions?
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