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Inflation Adjustments For Tax Year 2022

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IRS Provides Tax Inflation Adjustments for Tax Year 2022

The IRS makes adjustments to personal exemption, standard deduction, tax brackets,
and other tax credits to account for changes in the cost of living.

The IRS released inflation adjustments for a number of tax provisions in 2020.Some provisions are not subject to inflation adjustments, including the $10,000 cap on the state and local tax deduction. Revenue Procedure 2021-45.

Married couples filing jointly will see their standard deduction rise from $25,100 to $25,900 in 2022. Income thresholds for each tax bracket will also increase for 2022. The top individual income tax rate of 37 percent for that year will be applied to income above $647,850 for married couples, and $539,900 for individuals.

What You Need to Know About Your 2022 Tax Changes

In the United States, personal income taxes contribute greatly to the government’s deficit. Individuals with higher incomes are required to pay a larger share of taxes in a progressive tax system. 

Earned Income Credit

For taxable years beginning in 2022, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. 

The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. 

Standard Deduction

Dependent – For taxable years beginning in 2022, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,150, or (2) the sum of $400 and the individual’s earned income.

Aged or blind – For taxable years beginning in 2022, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,400. The additional standard deduction amount is increased to $1,750 if the individual is also unmarried and not a surviving spouse.

Frequently Asked Questions

The IRS has adjusted the inflation-adjusted items for tax year 2022. We’re here to help you understand  those changes.

How Getting a Raise Affects Your Taxes?

Getting a raise or a promotion is a great feeling and it can even allow you to pay less in taxes. However, getting a raise or a promotion may decrease your take-home pay. The Internal Revenue Service (IRS) has announced the annual inflation adjustments for the year 2022, including tax rate schedules, tax tables and cost-of-living adjustments.

State Income Tax vs. Federal Income Tax: What's the Difference?

State income tax is a tax imposed on individuals or businesses in a state, for the privilege of doing business or living in that state. Federal income tax is a tax imposed on individuals or businesses for various reasons. State income tax is higher than federal income tax because federal income tax is based on the income earned within a state, while state income tax is based on the income earned in the state and then distributed to the state.

Income Tax vs. Capital Gains Tax: Which Is More?

Taxes are a very important part of business. They are used by governments to fund their spending and by businesses to fund their expenses. Taxation is a matter of opinion and must be addressed on a case-by-case basis.Income tax is levied on income earned while capital gains tax is levied on the sale of assets, such as stocks and real estate.Income tax rates vary according to a person’s income level while capital gains taxes are always the same for everyone.

Single Withholding vs. Married Withholding: What's the Difference?

The main difference between single and married withholding is that married couples are able to combine their incomes to figure out which one pays the most in taxes.Single withholding is when you withhold tax on your own income.Married withholding is when your spouse also withholds tax on their own income.

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