Understand Where Your Federal Tax Dollars Go
In this 3-part guide, we will explore where your tax dollars go, some of the ways tax filing may look different in 2022, and what you can do to prepare. Keep in mind, this guide is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your strategy.
Before we dive into the upcoming tax brackets and what you can do to prepare for 2022, it can be helpful to understand precisely where the government allocates your federal tax dollars.
In 2021, the federal government spent $6.82 trillion, which equals 30% of the nation’s gross domestic product. Further examination reveals that three significant areas of spending make up the majority of the budget.1
Medicare
Medicare accounted for $696.5 billion, or 10% of the budget, in 2021.1
Defense Spending
Another $754.8 billion, or 11% of the budget, was paid for defense and security-related international activities. The bulk of the spending in this category reflects the underlying costs of the Defense Department. This includes the cost of multiple defense initiatives and related activities, described as Overseas Contingency Operations in the budget.1
Social Security
Seventeen percent of the budget, or $1.1 trillion, was paid for Social Security, which provided monthly retirement benefits averaging $1,497 to 46 million retired workers. Social Security also provided benefits to 3 million spouses and children of retired workers, 6 million surviving children and spouses of deceased workers, and 10 million disabled workers and their eligible dependents.1,2
The Tax Brackets
The tax brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Here are the tax brackets and the corresponding income ranges.3
| 2021 Tax Rate | Single | Married Filing Jointly |
| 10% | $0 to $9,950 | $0 to $19,900 |
| 12% | $9,951 to $40,525 | $19,901 to $81,050 |
| 22% | $40,526 to $86,375 | $81,051 to $172,750 |
| 24% | $86,376 to $164,925 | $172,751 to $329,850 |
| 32% | $164,926 to $209,425 | $329, 851 to $418,850 |
| 35% | $209,426 to $523,600 | $418,851 to $628,300 |
| 37% | $523,601+ | $628,301+ |
These modest changes to the tax brackets also mean that wage earners may fall into lower brackets.
Here is one example. A single filer at $86,000 in taxable income would fall into the 24% bracket for
tax year 2020. The filer would be in the 22% tax bracket in 2021.
These new rates are scheduled to expire in 2025 unless Congress acts to make them permanent. Exemptions also changed under the new tax code.
Here is an overview of the standard deductions since 2019:4
| Tax Year | 2019 | 2020 | 2021 |
| Single | $12,200 | $12,400 | $12,550 |
| Married filing jointly | $24,400 | $24,800 | $25,100 |
| Married filing separately | $12,200 | $12,400 | $12,550 |
| Head of household | $18,350 | $18,650 | $18,800 |
IMPORTANT DEADLINES*
JANUARY 15, 2022
If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, postmark this payment by January 15, 2022.
APRIL 15, 2022
FIRST QUARTER 2022 ESTIMATED TAX PAYMENT DUE
2021 INDIVIDUAL TAX RETURNS DUE
Most taxpayers have until April 15 to file tax returns. Email or postmark your returns by midnight on this date.
LAST DAY TO MAKE A 2021 IRA CONTRIBUTION
If you have not already contributed fully to your retirement account for 2021, April 15 is your last chance to fund a traditional IRA or a Roth IRA.
INDIVIDUAL TAX RETURN EXTENSION FORM DUE
If you cannot file your taxes on time, file your request for an extension by April 15 to push your deadline back to October 15, 2022.
JUNE 15, 2022
SECOND QUARTER 2022 ESTIMATED TAX PAYMENT DUE
SEPTEMBER 15, 2022
THIRD QUARTER 2022 ESTIMATED TAX PAYMENT DUE
OCTOBER 15, 2022
EXTENDED INDIVIDUAL TAX RETURNS DUE
If you received an extension, you have until October 15 to file your 2021 tax return.
*The IRS has the authority to adjust federal tax deadlines on short notice based on its assessment of financial or economic conditions. Also, please note that tax deadlines that fall on weekends or national holidays will be delayed until the following business day.
In part 2, we’ll share how to prepare in additional to tax credits and deductions.
Damian Sylvia
Retirement Income Solutions
Office: 732-508-6044
Direct: 732-284-0902
Email: Damian@MyFinancialSolution.org
Website: RetirementSolutionsNJ.com
- Forbes.com, December 9, 2021
- SSA.gov, January 24, 2022