The IRS on Wednesday announced inflation adjustments for 2022 pertaining to a host of features in the tax code, including the standard deduction and tax brackets.
The changes take into account the fact that inflation has increased this year. The inflation adjustments apply to the 2022 tax year, which households will file tax returns for in 2023.
The standard deduction, which is claimed by the vast majority of taxpayers, will increase by $800 for married couples filing jointly, going from $25,100 for 2021 to $25,900 for 2022. For single filers, the standard deduction will rise by $400, from $12,550 to $12,950, the IRS said.
The income thresholds for each tax bracket will also increase for 2022. The top individual income tax rate of 37 percent will apply for that year to income above $647,850 for married couples and to income above $539,900 for single filers. Those thresholds are up from $628,300 for married couples and $523,600 for single filers for 2021.
The IRS releases inflation adjustments for tax provisions on an annual basis. The adjustments are based on average inflation for the 12-month period ending in August and are not directly related to the inflation data that the Labor Department released Wednesday. The IRS bases its adjustments on a slightly different measure of inflation than the one that is most commonly reported.
Still, the IRS adjustments reflect the past year's higher inflation rate. For example, the $800 increase in the standard deduction for married couples from 2021 to 2022 was $500 higher than the increase from 2020 to 2021, which was $300.
The IRS also released inflation adjustments for a number of other tax provisions, including the maximum amount of the earned income tax credit, the estate tax exemption amount and the monthly limit on transportation benefits.
Some provisions in the tax code are not subject to inflation adjustments, including the $10,000 cap on the state and local tax deduction that Democrats are seeking to roll back in their social spending bill.