Why Does the Tax Bracket Jump From 12% to 22%?

The U.S. federal income tax system uses a progressive structure with several tax brackets. A feature of the current system is the 10-percentage-point gap between the 12% and 22% tax rates. This jump is a direct result of specific legislation that reshaped how individual income is taxed. Understanding the mechanics of tax brackets is the first step to clarifying why this particular rate structure exists and how it affects a taxpayer’s overall liability.

How Progressive Tax Brackets Function

The U.S. employs a marginal tax rate system, meaning that as your income increases, it is progressively taxed at higher rates. A common misconception is that if you fall into the 22% tax bracket, all of your income is taxed at 22%. This is incorrect; only the portion of your income that falls within that specific bracket is subject to that rate. Each tax rate applies only to the income within its defined range, or bracket.

Consider a single individual with a taxable income of $50,000. For the 2024 tax year, the first $11,600 of their income is taxed at the 10% rate, resulting in $1,160 of tax. The next portion of their income, from $11,601 up to $47,150, falls into the 12% bracket. This segment of income ($35,550) is taxed at 12%, which amounts to $4,266 of tax.

Only the income that exceeds the 12% bracket’s upper limit is taxed at the next rate. In this example, the income from $47,151 to $50,000, which is $2,850, falls into the 22% bracket. The tax on this portion is $627. The individual’s total federal income tax is the sum of the taxes from each bracket: $1,160 (from the 10% bracket) + $4,266 (from the 12% bracket) + $627 (from the 22% bracket), for a total of $6,053.

The Tax Cuts and Jobs Act of 2017

The current structure of the individual income tax brackets, including the jump from 12% to 22%, was established by the Tax Cuts and Jobs Act of 2017 (TCJA). This legislation was a significant overhaul of the U.S. tax code, with a primary goal of reducing the tax burden for many Americans.

Before the TCJA, the federal income tax brackets had rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The TCJA altered these rates to the current system of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These changes were accompanied by a near-doubling of the standard deduction and the elimination of personal exemptions, which also changed how taxable income is calculated.

The modifications introduced by the TCJA are not permanent and are scheduled to expire at the end of 2025. If Congress does not act to extend them, the tax brackets are set to revert to their pre-TCJA rates in 2026. This would mean the 12% bracket would return to 15% and the 22% bracket would go back to 25%.

The Logic Behind the Bracket Structure

The gap between the 12% and 22% tax brackets is a direct consequence of how the TCJA restructured the previous tax rates. The act was designed to provide tax relief for middle-income earners by adjusting the brackets that previously captured this group. The legislation effectively replaced the 15% and 25% brackets from the pre-TCJA system with the lower 12% and 22% brackets.

Prior to 2018, taxpayers saw their income move from a 10% bracket to a 15% bracket, and then to a 25% bracket. The TCJA lowered the 15% rate to 12% and the 25% rate to 22%. While the percentage point jump appears large, the change resulted in a tax reduction for individuals whose income would have previously been taxed at the 15% and 25% rates.

Under the old system, income in the 15% bracket was taxed at that rate, but under the TCJA, that same income is now taxed at 12%. Similarly, income that would have fallen into the 25% bracket is now taxed at 22%. The larger gap is a mathematical byproduct of lowering two separate, consecutive tax rates.