The IRS announced higher federal income tax brackets and standard deductions for 2022 amid rising inflation.
The consumer price index surged by 6.2% in October compared to the previous year, the biggest jump in more than three decades.
As price hikes continue, the IRS has boosted the income thresholds for each bracket, applying to tax year 2022 for returns filed in 2023.
These brackets show how much someone pays for federal taxes on each portion of their income after subtracting deductions and credits.
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The standard deduction, claimed by most taxpayers, will also increase for 2022, rising to $25,900 for married couples filing jointly, and to $12,950 for single filers.
The IRS also made other inflation adjustments, such as changes to the alternative minimum tax, a parallel system for higher earners, and an increased estate tax exemption.
Moreover, there’s a boost for the earned income tax credit, a write-off for low- to moderate-income families, and higher flexible spending account limits, among other changes.
Workers may also save more to 401(k) plans in 2022, according to last week’s announcement. But there won’t be a higher limit for individual retirement accounts.