U.S. Federal Tax Brackets

U.S. Federal Income Tax Brackets

The term tax bracket refers to a range of incomes that are taxed at a specific rate. The tax brackets for 2022 have not changed in comparison to the previous year, and taxable income is still divided into seven federal tax brackets as of 2021: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. However, the IRS has increased the income limits to adjust for the highest annual rise in inflation since 1990. You may find it helpful to know in-depth about federal tax brackets before preparing your tax plan.

2022 Federal Income Tax Brackets

The IRS increased the income range for each tax bracket in 2022 to adjust for inflation but kept the tax rates the same. Income levels in tax brackets have risen 3%, almost thrice the increase in the average income range over the federal tax rate 2021. There is a slight increase in standard deductions over federal taxes in 2021. The IRS has set the following deductions for 2021-

  • Single filers, married couples filing separately- $12,950
  • Married couples filing jointly- $25,900
  • Head of Households- $19,400

2022 Single Filers

Taxable income   Base tax amount to be paid Federal tax rate
Less than $10,275 $0 10%
$10,256- $41,775 $1027.50 12% of income over $10,276
$41,776- $89,075 $4807.50 22% of income over $41,776
$89,076- $170,050 $15,213.50 24% of income over $89,076
$170,050- $215,950 $34,647.50 32% of income over $170,050
$215,951- $539,950 $47,843 35% of income over $215,951
Over $539,951 $162,718 37% of income over $539,951

 

2022 Married, filing jointly

Taxable income   Base tax amount to be paid Federal tax rate
Less than $20,550 $0 10%
$20,551- $83,550 $2055 12% of income over $20,551
$83,551- $178,150 $9,615 22% of income over $83,551
$178,151- $340,100 $30,427 24% of income over $178,151
$340,101- $431,900 $69,295 32% of income over $340,101
$431,901- $647,850 $98,671 35% of income over $431,901
Over $647,851 $174,253.50 37% of income over $647,851

 

2022 Married, filing separately

Taxable income   Base tax amount to be paid Federal tax rate
Less than $10,275 $0 10%
$10,256- $41,775 $1027.50 12% of income over $10,276
$41,776- $89,075 $4807.50 22% of income over $41,776
$89,076- $170,050 $15,213.50 24% of income over $89,076
$170,050- $215,950 $34,647.50 32% of income over $170,050
$215,951- $539,950 $47,843 35% of income over $215,951
Over $539,951 $162,718 37% of income over $539,951

 

2022 Head of household

Taxable income   Base tax amount to be paid Federal tax rate
Less than $14,650 $0 10%
$14,651- $55,900 $1,465 12% of income over $14,651
$55,901- $89,050 $6,415 22% of income over $55,901
$89,076- $170,050 $13,708 24% of income over $89,076
$170,01- $215,950 $33,148 32% of income over $170,051
$215,951- $539,950 $47,836 35% of income over $215,951
Over $539,951 $161,218.50 37% of income over $539,951

 

2022 How tax brackets work

A common misconception is that your total taxable income is taxed at an absolute rate. US federal taxes are progressive but marginal. While your income may fall under a certain tax bracket, your income is taxed in portions. While the tax rate increases with additional income, you only have to pay a fixed tax rate for each income slab. The IRS announced seven different tax brackets in federal tax rates for 2022: 10, 12, 22, 24, 32, 35, and 37 percent. Each dollar of income is taxed at an incremental basis on the tax rate it falls.

The amount of tax you pay depends on your total taxable income and your filing status.

You can find your total taxable income after subtracting deductions that you are eligible for from your income. You qualify for the following federal tax standard deductions (2022) if you are-

  • Single taxpayers, married taxpayers filing separately- $12,500
  • Married taxpayers filing jointly- $25,900
  • Head of family taxpayers- $19,400

Example

Let’s calculate how much tax you need to pay as a single filer if your annual income in 2021 is $150,000. Here’s the tax rate chart for 2021 single filers with taxable income up to $164,925.

$9,950 or less $0 10%
$9,951 – $40,525 $995 12% of income over $9,950
$40,526 – $86,375 $4,664 22% of income over $40,525
$86,376 – $164,925 $14,751 24% of income over $86,375

 

You are eligible for a $12550 standard deduction, making your total taxable income $150000-$12550=$137450

In this case, your total taxable income is divided into 4 parts:

1. $9950 taxed at 10%

Tax to be paid- $995

2. $30574 ($40,525- $9,951) taxed at 12%

Tax to be paid- $3667

3. $45850 ($86,375-$40,526) taxed at 22%

Tax to be paid- $10087

4. $51074 ($137450-$86376) taxed at 24%

Tax to be paid- $12258

Total tax to be paid- $995+$3667+$10087+$12258 = $27,007

Effective tax rate- $27,007/$150000*100=18%

2021 Federal Income Tax Brackets

Compared to the previous year (2020), there were a few routine changes in the tax brackets in 2021. The number of tax brackets in 2021 stayed the same at seven, but there was an average increase of 1% across tax brackets for inflation adjustments. The IRS has set the following deductions for 2021-

  • Single filers, married couples filing separately- $12,550
  • Married couples filing jointly- $18,800
  • Head of Households- $25,100

It’s best to pay taxes early to avoid penalties and delays in tax refunds. The Consolidated Appropriation Act 2020 also introduced an additional tax of $435 or 100% of the tax due, whichever is less, for failing to pay taxes within 60 days of the due date. The IRS opened its tax filing window earlier this year on 24 Jan and closed it on 18 Apr, with 6-months extension requests up to 17 Oct.

2021 Single Filers

Taxable income   Base tax amount to be paid Federal tax rate
$9,950 or less $0 10%
$9,951 – $40,525 $995 12% of income over $9,950
$40,526 – $86,375 $4,664 22% of income over $40,525
$86,376 – $164,925 $14,751 24% of income over $86,375
$164,926 – $209,425 $33,603 32% of income over $164,925
$209,426 – $523,600 $47,843 35% of income over $209,425
$523,601 or more $157,804.25 37% of income over $523,600

 

2021 Married, filing jointly

Taxable income   Base tax amount to be paid  Federal tax rate
$19,900 or less $0 10%
$19,901 – $81,050 $1,990 12% of income over $19,900
$81,051 – $172,750 $9,328 22% of income over $81,050
$172,751 – $329,850 $29,502 24% of income over $172,750
$329,851 – $418,850 $67,206 32% of income over $329,850
$418,851 – $628,300 $95,686 35% of income over $418,850
$628,301 or more $168,993.50 37% of income over $628,300

 

2021 Married, filing separately

Taxable income   Base tax amount to be paid Federal tax rate
$9,950 or less $0 10%
$9,951 – $40,525 $995 12% of income over $9,950
$40,526 – $86,375 $4,664 22% of income over $40,525
$86,376 – $164,925 $14,751 24% of income over $86,375
$164,926 – $209,425 $33,603 32% of income over $164,925
$209,426 – $314,150 $47,843 35% of income over $209,425
$314,150 or more $84,497 37% of income over $314,150

 

2021 Head of household

Taxable income   Base tax amount to be paid Federal tax rate
$14,200 or less $0 10%
$14,201 – $54,200 $1420 12% of income over $14,200
$54,201 – $86,350 $6,220 22% of income over $54,200
$86,351- $164,900 $13,293 24% of income over $86,350
$164,901- $209,400 $32,145 32% of income over $164,925
$209,401 – $523,600 $46,385 35% of income over $209,400
$523,601 or more $156,355 37% of income over $523,600

What is a marginal tax rate?

A marginal tax rate is a tax you pay for every additional dollar of income. The marginal taxation system divides people’s income into several brackets and individually taxes each portion of the income bracket at a specific tax rate. The total tax you pay equals the sum of taxes in each tax bracket. The average tax rate, also known as the effective tax rate, in this case, is the total tax you pay divided by your total income. The IRS decides the tax brackets for each year. Currently, the federal marginal tax rate ranges between 10-and 37%. As your income increases, you need to pay taxes progressively on each income slab.

Did tax tables change next year?

The IRS implements the annual tax tables each in October/November, considering fiscal deficit, inflation, employment data, etc. Since the pandemic, tax tables have not changed drastically. Only the income slabs have increased to account for rising inflation. The IRS also increased standard deduction slightly to reduce the overall tax burden. However, tax brackets remained the same at 10% on the lowest income slab of $10,275 and a maximum of 37% on income above $539,951.

Conclusion

Various income levels are subject to different income tax rates, or tax brackets. The U.S government charges tax on income in seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

You may want to file your taxes at the earliest but correctly to avoid penalties and delays in tax refunds. The IRS starts the tax filing process from Jan/Feb and lasts up to the US Tax Day, 15 Apr. You may seek a 6-month extension to file taxes, but it does not extend your tax payment window, and you still need to pay your taxes on time.

You can easily fill and file your tax returns if you understand the basics of the marginal taxation system. The IRS has also launched a public-private partnership program called Free File to help taxpayers file independently. If your taxable income was less than $73,000 in 2021, you could use the Free File Guided Tax Preparation software to file taxes for absolutely free. You can also use Free File Fillable Forms to file income tax for any income.

You can file your tax manually, but the IRS urges electronic filing to speed up tax refunds. Prepare all documents like Form W 2/4/9 and any information from your employer before January. You can access the IRS Free File to store your completed forms 1040 and 1040 SR and file your return immediately when the window opens.

Matthew Levy Matthew Levy Last update:
Matthew is a freelance financial copywriter with 10+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.