2022-2023 Accurate Federal Income Tax Brackets & Tax Rates

In the US, tax rates are based on your income — higher income earners are taxed at a higher rate, while lower income earners pay a lower rate. The rate you pay depends on your tax bracket, which is set according to your annual income.  The rate you pay depends on your tax bracket, which is set according to your annual income.

Federal Tax Brackets

The United States is one of many countries with a progressive tax system. This means that, instead of all taxpayers owing the same percentage of their income to the federal government, the highest earners instead owe a greater percentage of yearly income, while the lower earners owe a lesser percentage.

The Internal Revenue Service divides taxpayers into categories to determine exactly which percentage of their income they must pay in taxes. These categories are called tax brackets. The U.S. currently has seven tax brackets.

To determine your tax bracket, you must calculate your taxable income and decide on your filing status. Once you’ve done this, you can calculate your marginal tax rate to find out what you owe. Deductions and credits can help you adjust your taxable income, which lets some filers move into a lower tax bracket and reduce their federal income taxes.

Here, we’ll go over the tax bracket categories for the current and coming tax years. We’ll discuss how to calculate your marginal tax rate and offer pointers for navigating the tax deduction and credit system.

2022 Federal Income Tax Brackets

Your tax bracket will determine your tax rate for 2022 federal income taxes, which are due in April 2023. The IRS, or Internal Revenue Service, separates tax brackets based on several factors, including your taxable income and your filing status. The tax system in the U.S. is progressive, meaning that a taxpayer with a higher income will have a higher tax rate than one with a lower income.

Taxable income is divided into 7 levels, with the tax rate increasing as income increases. Meanwhile, filing status is divided between four categories: single filer, married filing separately, married filing jointly, or a head of household. Figuring out your income tax bracket involves combining your taxable income and your filing status.

For instance, a single taxpayer who makes $42,000 in taxable income has a tax rate of 22%. However, a head of household who makes the same taxable income has a tax rate of only 12%. Meanwhile, the tax bracket for joint filers is determined by their total income, rather than by individual income.

2023 Federal Income Tax Brackets

Tax brackets for the 2023 tax year are split according to both filing status and taxable income levels, just like those for the 2022 tax year. However, inflation adjustments, tax cuts, and increases in the cost of living changes mean that the income thresholds determining tax brackets can change from year to year. For 2023, in response to high inflation and price hikes, the IRS has adjusted the income thresholds that determine tax brackets.

For instance, a married couple filing jointly in the 2022 tax year needed to earn more than $647,850 in taxable income to be placed in the highest tax bracket, which has a 37% tax rate. However, in 2023, that same couple, filing jointly, would need to earn more than $693,750 to be placed in that highest tax bracket.

Marginal Tax Rates

Though your taxable income and filing status determine your tax bracket, additional factors can cause your income to be taxed at a higher or lower rate, which complicates your tax filing process.

Figuring out your total tax involves dividing your income into a few categories. Different rates may apply to different portions of your income. This is further complicated by capital gains tax, which some investors may pay after they sell assets. While some of your income categories will be taxed at a lower rate, certain additional income within your tax bracket may be taxed instead at a higher rate. This higher rate is known as your marginal tax rate, and the income that falls into it is classified within your marginal tax bracket.

For instance, in the 2022 tax system, a single filer making $170,051 to $215,950 falls into the third-highest tax bracket, with a rate of 32%. But this doesn’t mean they pay 32% on their entire income. Rather, this individual owes the IRS $34,647.50—and then owes 32% on whatever income they make above the $170,051 minimum. If this individual makes $200,000, for instance, they’ll subtract $170,051 from their total income, leaving $29,949. That $29,949 is their marginal tax bracket, and they’ll pay an additional 32% on it.

If you think you might need to pay capital gains tax and want to figure out what your tax rate will be, check out Public’s capital gains tax rate calculator.

Figuring Out Your Tax Bracket

The tax bracket system can be confusing, especially once marginal tax rates are taken into account. Luckily, tax advisors and tax software tools can help you figure out your bracket and what you owe. The IRS website also has a host of resources that can help you determine your taxable income, which will let you calculate your tax bracket.

Optimizing Your Tax Bracket

At the most basic level, a person who makes more money falls into a higher tax bracket, and a person who makes less money falls into a lower one.

But your financial situation isn’t only determined by income: it’s also affected by your lifestyle, spending, and factors like student loans. The tax system accounts for these additional factors through tax deductions and tax credits. By taking advantage of these, you may be able to fit into a lower tax bracket and reduce your tax bill. You may also be able to defer taxes, resulting in a higher tax return down the line. Some investors can also offset taxes on crypto and other investments that experience losses.

Deductions lower your taxable income. Many taxpayers choose to take the standard deduction, which is a set amount by which your taxes are reduced. This applies to most taxpayers who meet filing status criteria. However, other taxpayers, particularly those with complex assets, instead choose to calculate itemized deductions. Itemized deductions allow you to write off various specific expenses. These include charitable donations, property taxes, medical bills, and mortgage interests. Claiming these deductions is more labor-intensive than taking the standard deduction, but depending on which ones apply to you, the itemized deductions might be more effective at moving you into a lower tax bracket or maximizing your income tax return.

Tax credits, meanwhile, are dollar-for-dollar reductions in owed taxes. These include reductions for higher education, student loan interests, and contributions to retirement accounts. Taxes paid to other countries can also count for a tax credit.

Other strategies, including tax-loss harvesting, can help optimize your tax bill, which may have knock-on effects for your tax bracket.

The Bottom Line

Whether you’re single or married, high-earning or low-earning, you can likely save money by understanding how federal tax brackets function. Knowledge of tax brackets can do more than simply help you calculate your taxes. Qualifying for and making use of credits and deductions can help you shift into a lower tax bracket, meaning that you could owe a lower amount. Luckily, tax advisors and online services are available to help you through the process, making your tax season easier—and your return potentially higher.

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