Tax brackets and tax rates
For many people, a tax refund is their once-a-year opportunity to take a big financial step — to pay down debt, to build savings or start investing, to buy a car or fund a vacation.
If you’re getting money back from Uncle Sam this year, and you’re thinking about how to make it work for you, MKG Tax Consultants Financial Advisors can help.
There are seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your tax bracket is determined by your taxable income and filing status. For the 2022 tax year, the IRS bumped up the income thresholds for all filing statuses to account for inflation. You can compare the changes between 2021 and 2022 below.
2021 federal income tax brackets
(for taxes due in April 2022 or in October 2022 with an extension)
Expand the filing status that applies to you.Single filers
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $9,950 | 10% of taxable income |
| 12% | $9,951 to $40,525 | $995 plus 12% of the amount over $9,950 |
| 22% | $40,526 to $86,375 | $4,664 plus 22% of the amount over $40,525 |
| 24% | $86,376 to $164,925 | $14,751 plus 24% of the amount over $86,375 |
| 32% | $164,926 to $209,425 | $33,603 plus 32% of the amount over $164,925 |
| 35% | $209,426 to $523,600 | $47,843 plus 35% of the amount over $209,425 |
| 37% | $523,601 or more | $157,804.25 plus 37% of the amount over $523,600 |
Married, filing jointly
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $19,900 | 10% of taxable income |
| 12% | $19,901 to $81,050 | $1,990 plus 12% of the amount over $19,900 |
| 22% | $81,051 to $172,750 | $9,328 plus 22% of the amount over $81,050 |
| 24% | $172,751 to $329,850 | $29,502 plus 24% of the amount over $172,750 |
| 32% | $329,851 to $418,850 | $67,206 plus 32% of the amount over $329,850 |
| 35% | $418,851 to $628,300 | $95,686 plus 35% of the amount over $418,850 |
| 37% | $628,301 or more | $168,993.50 plus 37% of the amount over $628,300 |
Married, filing separately
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $9,950 | 10% of taxable income |
| 12% | $9,951 to $40,525 | $995 plus 12% of the amount over $9,950 |
| 22% | $40,526 to $86,375 | $4,664 plus 22% of the amount over $40,525 |
| 24% | $86,376 to $164,925 | $14,751 plus 24% of the amount over $86,375 |
| 32% | $164,926 to $209,425 | $33,603 plus 32% of the amount over $164,925 |
| 35% | $209,426 to $314,150 | $47,843 plus 35% of the amount over $209,425 |
| 37% | $314,151 or more | $84,496.75 plus 37% of the amount over $314,150 |
Head of household
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $14,200 | 10% of taxable income |
| 12% | $14,201 to $54,200 | $1,420 plus 12% of the amount over $14,200 |
| 22% | $54,201 to $86,350 | $6,220 plus 22% of the amount over $54,200 |
| 24% | $86,351 to $164,900 | $13,293 plus 24% of the amount over $86,350 |
| 32% | $164,901 to $209,400 | $32,145 plus 32% of the amount over $164,900 |
| 35% | $209,401 to $523,600 | $46,385 plus 35% of the amount over $209,400 |
| 37% | $523,601 or more | $156,355 plus 37% of the amount over $523,600 |
Capital gains tax
Capital gains taxes are assessed on profits generated from the sale of an asset. Short-term gains are taxed as ordinary income, while long-term gains are charged at either 0%, 15% or 20% based on filing status and taxable income. For the 2022 tax year, the IRS increased these income thresholds for long-term gains. See the differences below.2021 capital gains tax rates
| Tax-filing status | Single | Married, filing jointly | Married, filing separately | Head of household |
|---|---|---|---|---|
| 0% | $0 to $40,400 | $0 to $80,800 | $0 to $40,400 | $0 to $54,100 |
| 15% | $40,401 to $445,850 | $80,801 to $501,600 | $40,401 to $250,800 | $54,101 to $473,750 |
| 20% | $445,851 or more | $501,601 or more | $250,801 or more | $473,751 or more |
| Short-term capital gains are taxed as ordinary income according to federal income tax brackets. |
2022 capital gains tax rates
| Tax-filing status | Single | Married, filing jointly | Married, filing separately | Head of household |
|---|---|---|---|---|
| 0% | $0 to $41,675 | $0 to $83,350 | $0 to $41,675 | $0 to $55,800 |
| 15% | $41,676 to $459,750 | $83,351 to $517,200 | $41,676 to $258,600 | $55,801 to $488,500 |
| 20% | $459,751 or more | $517,201 or more | $258,601 or more | $488,501 or more |
| Short-term capital gains are taxed as ordinary income according to federal income tax brackets. |
Earned income tax credit
The earned income tax credit (EIC or EITC) is a refundable tax credit for low- and moderate-income workers. The amount depends on income and the number of children. People without kids can qualify. For 2022, the earned income credit range will be $560 to $6,935, depending on income and the number of children.
An important note: You may notice that the credit available to persons with no children has significantly decreased in 2022. This is because the American Rescue Plan Act temporarily boosted it from $543 to $1,502 in 2021; this expansion has not been carried over to the 2022 tax year.
2021 earned income tax credit
| Number of children | Maximum earned income tax credit | Max AGI, single or head of household filers | Max AGI, married joint filers |
|---|---|---|---|
| 0 | $1,502 | $21,430 | $27,380 |
| 1 | $3,618 | $42,158 | $48,108 |
| 2 | $5,980 | $47,915 | $53,865 |
| 3 or more | $6,728 | $51,464 | $57,414 |
2022 earned income tax credit
| Number of children | Maximum earned income tax credit | Max AGI, single or head of household filers | Max AGI, married joint filers |
|---|---|---|---|
| 0 | $560 | $16,480 | $22,610 |
| 1 | $3,733 | $43,492 | $49,622 |
| 2 | $6,164 | $49,399 | $55,529 |
| 3 or more | $6,935 | $53,057 | $59,187 |
Retirement plan contribution and income limits
Contributing to an IRA or a 401(k) can cut your tax bill significantly, and the amount you can contribute has increased for 2022. It’s important to note that traditional IRA income limits apply only if you (or your spouse) have a retirement account at work.
Traditional IRA income limits
| Filing status | 2021 MAGI | 2022 MAGI | Deduction |
|---|---|---|---|
| Single or head of household (and covered by retirement plan at work) | $66,000 or less | $68,000 or less | Full deduction |
| More than $66,000 but less than $76,000 | More than $68,000 but less than $78,000 | Partial deduction | |
| $76,000 or more | $78,000 or more | No deduction | |
| Married filing jointly (and covered by retirement plan at work) | $105,000 or less | $109,000 or less | Full deduction |
| More than $104,000 but less than $124,000 | More than $105,000 but less than $125,000 | Partial deduction | |
| $125,000 or more | $129,000 or more | No deduction | |
| Married filing jointly (spouse covered by retirement plan at work) | $198,000 or less | $204,000 or less | Full deduction |
| More than $198,000 but less than $208,000 | More than $204,000 but less than $214,000 | Partial deduction | |
| $208,000 or more | $214,000 or more | No deduction | |
| Married filing separately (you or spouse covered by retirement plan at work) | Less than $10,000 | Less than $10,000 | Partial deduction |
| $10,000 or more | $10,000 or more | No deduction |
Roth IRA income limits
| Filing status | 2021 MAGI | 2022 MAGI | Maximum annual contribution |
|---|---|---|---|
| Single, head of household or married filing separately (if you didn’t live with spouse during year) | Less than $125,000 | Less than $129,000 | $6,000 ($7,000 if 50 or older) |
| $125,000 up to $140,000 | $129,000 up to $144,000 | Contribution is reduced | |
| $140,000 or more | $144,000 or more | No contribution allowed | |
| Married filing jointly or qualifying widow(er) | Less than $198,000 | Less than $204,000 | $6,000 ($7,000 if 50 or older) |
| $198,000 up to $208,000 | $204,000 up to $214,000 | Contribution is reduced | |
| $208,000 or more | $214,000 or more | No contribution allowed | |
| Married filing separately (if you lived with spouse at any time during year) | Less than $10,000 | Less than $10,000 | Contribution is reduced |
| $10,000 or more | $10,000 or more | No contribution allowed |
401(k) income limits
In 2022, individuals under the age of 50 can contribute $20,500. This is up from $19,500 in 2021. For those 50 or older, the catch-up contribution limit in 2022 is up to $27,000 from $26,000 in 2021.
Child care tax credit doubles this season: How to claim up to $16,000
The child and dependent care credit allows taxpayers to directly reduce their taxes by the amount spent on expenses related to child or dependent care, such as day care, babysitters or related transportation. Thanks to a one-time expansion in the American Rescue Plan Act, parents who paid for child care in 2021 are eligible to receive up to 50% of their expenses back as a tax break or refund.
The expanded child care tax credit maxes out at $8,000 for one dependent and $16,000 for two or more. The catch? You’ll need all your receipts and other monetary proof to make sure you can claim the tax break when you file your income tax return.
The child and dependent care credit is a tax break designed to let parents claim expenses from child care. For example, if you paid for a day care provider while you were working, that expense can be claimed as a credit when you file your taxes this year.
How is the child care credit different for 2021 taxes? In previous years, the maximum amount you could claim was $3,000 for one child or $6,000 for two or more. For 2021 expenses, you can claim up to $8,000 for one child or dependent and up to $16,000 for multiple children. The one-time expansion of the child care credit for 2021 also increases the maximum return rate for child care expenses from 35% to 50%.
What does that mean? In brief, for the 2021 tax year, you could get up to $4,000 back for one child and $8,000 back for care of two or more.
Before the American Rescue Plan, the child and dependent care credit was nonrefundable, meaning it could reduce your tax bill to zero but you would not receive a refund on anything extra. Now, the credit is fully refundable, meaning that you will receive money for it even if you don’t owe taxes.
What counts as a qualifying expense for the child care credit?
The law defines expenses based on child care providers, but there’s some wiggle room that also accounts for expenses like transportation. Any organization or person providing care for your dependent counts as long as you’re paying them.
How do I claim child care expenses on my tax return?
Make sure you have a detailed account of all child care expenses — most importantly any receipts you received from day cares or after-school programs showing your expenses. When tax day approaches, complete Form 2441 and attach it to your Form 1040 tax return.
According to the IRS, you’ll need to report the name, address and “taxpayer identification number” or TIN (it can be a Social Security number or the employer identification number) of the care provider on your return. You can use Form W-10 to request the information you need from your care provider.
What’s the maximum amount I can get back for child care expenses?
For expenses accrued in 2021, the IRS says you can claim up to $8,000 in eligible expenses for one dependent or up to $16,000 in eligible expenses for multiple dependents.
Keep in mind that the child and dependent care credit is not the same as the similarly named child tax credit. Advance child tax credit payments were disbursed on a monthly basis last year. If you’re eligible for the child tax credit and didn’t receive advance payments, you can receive between $500 and $3,600 per child as credit when you file your taxes.
Does my income affect how much money I can claim or get back?
To qualify for the child care credit, a tax filer must have earned income, such as wages from a job or unemployment. If you are married and filing a joint tax return, your spouse must also have earned income. (Exemptions apply to full-time students and people receiving disability benefits.) The IRS says that generally you may not take the child care credit if you are married and filing separately.
The maximum amount of claimable child care expenses — $8,000 for one child or $16,000 for two or more — is not affected by income level. However, the rate of return for the child care credit decreases as income increases.
For the 2021 tax year, the credit rate starts to reduce when a taxpayer’s income or household AGI (adjusted gross income), reaches $125,000. The credit rate is reduced by 1% for every $2,000 earned over $125,000, up until $183,000, where it settles at 20% for everyone earning $183,001-$400,000. For example, an AGI of $145,000 would receive a tax credit rate of 40%.
For those making more than $400,000, the credit rate again reduces by 1% for every $2,000 earned over $400,000, and becomes zero for families earning $438,000 or more. For example, an AGI of $410,000 would receive a tax credit rate of 15%.
Which dependents qualify to be included in the child care credit?
According to the IRS, qualifying rules for dependents are fairly broad, but a dependent must fit one of the following criteria:
- Be under the age of 13, or
- Be unable to care for themselves if 13 or older (for example, if you have a spouse or older dependent who is impaired and incapable of caring for themselves, and has lived with you for more than half the year, or
- Be physically or mentally incapable of self-care — even if their income was $4,300 or more.
In addition, the qualifying dependent must have a tax identification number, such as a Social Security number.
What do I need to know if I’m separated or divorced?
Only the custodial parent can claim the child care credit on their taxes. The IRS defines the custodial parent as the parent whom the child lived with for the greater number of nights in 2021. The rules for separated or divorced parents are similar to those governing the child tax credit and shared custody.
If you need assistance contact MKG Tax Consultants
Telephone 1-866-675-3933 SMS Text 559-668-0093