The Internal Revenue Service announced annual inflation adjustments for the 2022 tax year, including the standard deduction and tax brackets.
The changes take into account the rise in inflation this year and will apply to tax returns filed in 2023, the agency said in a press release this week.
The standard deduction — claimed by most taxpayers — will increase to $25,900, which is $800 more for married couples filing jointly for the tax year 2022. For single taxpayers and married individuals filing separately, the standard deduction will increase to $12,950 — up $400. The deduction for heads of household will rise to $19,400, a $600 increase.
Additionally, the income thresholds for all income brackets will increase as follows:
37% for incomes over $539,900 ($647,850 for married couples filing jointly)
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 below $10,275 ($20,550 for married couples filing jointly)
The IRS adjusts these numbers annually to account for changes in the cost of living based on formulas set by federal law. The adjustments are based on average inflation in the 12-month period ending in August.
Inflation has been elevated through the spring and summer and continues to increase this fall. Consumer prices soared 6.2% in October year over year, clocking in the fastest annual rise in consumer inflation since 1990, according to the Labor Department's Consumer Price Index (CPI).
Tax credit amounts for the Earned Income Tax Credit (EITC), tax exemption amount for estates and gifts, as well as the limit on transportation benefits, will also be adjusted for inflation.
The Democrats' tax plan that is moving through Congress includes tax hikes that may lower the top income bracket threshold and increase the top-bracket tax rate if implemented.