It’s a new year and it seems like citizens aren’t the only ones with new year resolutions. Even the government has set out to do new stuff this year, including the release of new tax brackets. The taxable income range per tax bracket has shifted forward somewhat to accommodate for inflation, even though the actual income tax brackets haven’t shifted. It’s all about foresight in tax preparation. And, because the federal income tax brackets for the 2022 tax year are now available, you can start planning for a tax-efficient 2022 budget. Since 2018, the tax rate has been unchanged. They’ll remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37% in 2022. However, to accommodate for inflation, the tax bands are modified each year. Depending on your taxable income and filing status, you will be assigned to a tax bracket.
Tax Brackets for Single Filers, Married Couples Filing Jointly, Married Couples Filing Separately, and Head of Household Filers.
|Tax rate||Single filers||Married Filing jointly||Married Filing separately||Head of household filers.|
|10%||Up to $10,275||Up to $20,550||Up to $10,275||Up to $14,650|
|12%||$10,276 to $41,775||$20,551 to $83,550||$10,276 to $41,775||$14,651 to $55,900|
|22%||$41,776 to $89,075||$83,551 to $178,150||$41,776 to $89,075||$55,901 to $89,050|
|24%||$89,076 to $170,050||$178,151 to $340,100||$89,076 to $170,050||$89,051 to $170,050|
|32%||$170,051 to $215,950||$340,101 to $431,900||$170,051 to $215,950||$170,051 to $215,950|
|35%||$215,951 to $539,900||$431,901 to $647,850||$215,951 to $323,925||$215,951 to $539,900|
|37%||Over $539,900||Over $647,850||Over $332,925||Over $539,900|
It’s vital to note that tax rates only apply to income that falls within the proper tax bracket range for your filing status when using the tax brackets. For example, in 2022, a married couple filing a joint return with $100,000 in taxable income will not pay $22,000 in tax because their total taxable income falls inside the joint filers’ 22 percent rate. The flat rate of 22% is not applied to the entire $100,000. Instead, using marginal tax rates, the first $20,550 of income is taxed at 10%, resulting in a tax of $2,055.The next $63,000 in earnings (from $20,550 to $83,550) is taxed at the rate of 12 percent, resulting in an extra $7,560 in taxes. The remaining $16,450 (the amount over $83,550) is then taxed at a rate of 22 percent, resulting in a tax bill of $3,619 for the taxpayer. A total tax bill of only $13,234 is the result. (This is $8,766 less than if the entire $100,000 was taxed at a flat 22 percent rate.)
2022 Ideal Income for Maximum Happiness, Based on 2022 Income Tax Rates
We can determine the perfect income for maximum happiness while paying a reasonable amount of tax now that you know the 2022 income tax bands. The optimal income for singles is $170,050 MAGI (Modified Adjusted Gross Income), while for married couples it is $340,100 MAGI (Modified Adjusted Gross Income). All income deductions and credits are included in the modified adjusted gross income. A marginal income tax rate of 24% applies to certain income levels. Any additional money earned will be taxed at an exorbitant rate of 32%. The income is sufficient to save for the future, own a house, travel, and support a family. However, your income is low enough that you still pay an acceptable tax rate.
If you can’t make $170,050 as a single person or $340,100 as a married couple, there is a second optimum salary level for achieving ultimate satisfaction and paying modest taxes. Singles have a MAGI of $41,775 while married couples have a MAGI of $83,551. You only pay a marginal income tax rate of 12% at these earning levels. Every dollar earned beyond these amounts is subject to a 22 percent marginal income tax rate, which can reach $89,075 for single filers and $178,150 for married couples filing jointly. The sole disadvantage of making less money is that you have less money to save and invest in absolute terms. As a result, if you want to earn the second ideal salary level, It will be difficult to retire early and pursue other interests at these salary levels. So, you need to invest early on cryptocurrencies and start using dogecoin trader bot.