IRS Tax Brackets: What You Need to Know
The laws that govern income taxes are always changing, and staying on top of these changes is crucial if you want your money to work for you. Most people know that the U.S. uses a progressive tax system, where the percentage of income that a person must relinquish is based on the total amount that they earned in that year. A higher income means a higher tax rate,and not just a higher tax bill—although the two go hand in hand.
More specifically, people who earn more fall into higher IRS tax brackets, and therefore pay a larger percentage of what they earn. However, they might not have to pay as much as their IRS tax bracket seemingly suggests.
Before you get started, remember that this material is for informational purposes only and is not a replacement for real life advice. Make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy.
Marginal Income Tax Brackets: Tax Year 2022
Consult this list of 2022 IRS tax brackets to find out how much you’ll owe when you file your return:
10% Income Tax Rate
- Single, or Married Filing Separately: Up to $10,275
- Married Filing Jointly: Up to $20,550
- Head of Household: Up to $14,650
12% Income Tax Rate
- Single, or Married Filing Jointly: From $10,276 to $41,775
- Married Filing Jointly: From $25,551 to $83,850
- Head of Household: From $14,651 to $55,900
22% Income Tax Rate
- Single, or Married Filing Separately: From $41,776 to $89,075
- Married Filing Jointly: From $83,851 to $178,180
- Head of Household: From $55,901 to $89,050
24% Income Tax Rate
- Single, or Married Filing Separately: From $89,076 to $170,050
- Married Filing Jointly: From $178,181 to $340,100
- Head of Household: From $89,051 to $170,050
32% Income Tax Rate
- Single, or Married Filing Separately: From $170,051 to $215,950
- Married Filing Jointly: From $340,101 to $431,900
- Head of Household: From $170,051 to $215,950
35% Income Tax Rate
- Single: From $215,951 to $539,900
- Married Filing Jointly: From $431,901 to $647,850
- Married Filing Separately: From $215,951 to $323,925
- Head of Household: From $215,951 to $539,900
37% Income Tax Rate
- Single: More than $539,900
- Married Filing Jointly: More than $647,850
- Married Filing Separately: More than $323,925
- Head of Household: More than $539,900
Calculating Your Total Income Tax Bill
You might think that determining your total income tax bill is as simple as calculating your gross income and referencing the tables seen above—but this isn’t actually the case. In fact, you’ll most likely end up paying significantly less than the rate listed with your tax bracket would suggest! Here’s what you should know:
- Before you calculate your total tax bill, you’ll need to determine your total income. Money earned through work, investments, interest, pensions, and most other sources counts toward this total, but gifts and inheritances—to name just two examples—may not.
- Instead of looking at one income tax bracket, you’ll need to look at each tax bracket that your income passed through during the course of the tax year. Let’s look at an example:
- A single person earns $180,000 in a given year. Their first $10,275 of income is taxed at a rate of 10%. Their next $31,499 of income (up to $41,775) is taxed at a rate of 12%. Everything from $41,776 to $89,075 is taxed at 22%—and this process continues until the entire $180,000 is accounted for!
- The average layperson might expect to pay a 24% rate on every dollar earned: a total tax bill of $43,200. In reality, they would actually pay far less.
Make Sense of Your Taxes with IntentGen Financial Partners
You shouldn’t be surprised to learn that the way you manage your income, investments, and expenses can also have a significant impact on what you owe. Here at IntentGen Financial Partners, we want to help every client direct their money toward the people and projects that matter most—and to that end, we’ve made our 2022 Financial Planning Guide available to read online. Just keep in mind that there’s no substitute for the advice and guidance of a real person!
When you’re ready to sit down with an expert who understands your priorities and wants to see you succeed, all you have to do is let us know.