Will I Get More Money Back With The New Standsrd Deduction
Although you may still be focused on filing your 2021 tax return, it's never too early to beginning thinking about next year's render. Proper tax planning requires an awareness of what's new and changed from last year — and there are enough of tax police force changes and updates taking effect in 2022 that yous need to know near.
Most of the tax changes enacted by last year's COVID-relief neb expired at the end of 2021. That ways things similar the child revenue enhancement credit, kid and dependent care credit, earned income credit and other popular tax breaks are different for the 2022 tax year than they were for 2021. Other 2022 tweaks are the event of new rules or annual aggrandizement adjustments. Merely no matter how, when or why the changes were made, they can hurt or assistance your lesser line — and then you need to exist set up for them. To help y'all out, we pulled together a list of the most important tax law changes and adjustments for 2022 (some related items are grouped together). Employ this information now so yous can hold on to more than of your hard-earned cash next twelvemonth when information technology's fourth dimension to file your 2022 render.
Kid Revenue enhancement Credit
Big changes were fabricated to the kid taxation credit for 2021 – but they were only temporary. The credit amount was increased, the credit was fabricated fully refundable, children up to 17 years of historic period qualified, and half the credit amount was paid in advance through monthly payments from July to December last twelvemonth. President Biden and Congressional Democrats tried to extend these enhancements for at least one more twelvemonth, just they oasis't been able to get that washed so far (and probably won't be able to later).
As a result, the kid tax credit reverts back to its pre-2021 class for the 2022 tax year. That ways the 2022 credit amount drops back downwardly to $2,000 per child (it was $three,000 for children six to 17 years of historic period and $3,600 for children five years old and younger for the 2021 revenue enhancement year). Children who are 17 years old don't qualify for the credit this year, because the former age limit (16 years former) returns. For some lower-income taxpayers, the 2022 credit is only partially refundable (up to $1,500 per qualifying child), and they must have earned income of at least $ii,500 to have advantage of the credit's limited refundability. And at that place volition be no monthly advance payments of the credit in 2022.
Child and Dependent Care Tax Credit
Significant improvements were also made to the child and dependent care credit for 2021. Only, again, the changes only applied for i year.
Past fashion of comparison, the 2021 credit was worth xx% to fifty% of up to $8,000 in eligible expenses for one qualifying child/dependent or $16,000 for two or more than. The per centum decreased as income exceeded $125,000. When yous combine the superlative percent and the expense limits, the maximum credit for 2021 was $four,000 if you had one qualifying child/dependent (l% of $8,000) or $8,000 if y'all had more than one (50% of $16,000). The credit was besides fully refundable in 2021.
For 2022, the child and dependent care credit is non-refundable. The maximum credit pct too drops from l% to 35%. Fewer intendance expenses are eligible for the credit, besides. For 2022, the credit is merely allowed for up to $3,000 in expenses for one child/dependent and $six,000 for more than i. When the 35% maximum credit percentage is practical, that puts the top credit for the 2022 tax year at $one,050 (35% of $iii,000) if you have just one kid/dependent in your family unit and $ii,100 (35% of $6,000) if you lot have more. In addition, the full child and dependent intendance credit will only be allowed for families making less than $xv,000 a year in 2022 (instead of $125,000 per year). Later that, the credit starts to stage-out.
Earned Income Tax Credit
More workers without qualifying children were able to claim the earned income tax credit (EITC) on their 2021 tax render, including both younger and older Americans. The "childless EITC" amounts were higher, likewise. Still, once once more, those enhancements expired at the end of concluding year.
Without the 2021 improvements in place, the minimum age for a childless worker to claim the EITC jumps dorsum up to 25 for 2022 tax returns (it was 19 in 2021). The maximum age limit (65 years of old), which was eliminated for the 2021 tax year, is also back in play for 2022. The maximum credit available for childless workers likewise plummets from $i,502 to $560 for the 2022 revenue enhancement year. Expanded eligibility rules for onetime foster youth and homeless youth that practical for 2021 are dropped as well. In addition, the rule allowing yous to employ your 2019 earned income to calculate your EITC if it boosted your credit amount no longer applies.
At that place are besides several aggrandizement-based adjustments that modify the EITC for the 2022 taxation year. For example, the maximum credit amount is increased from $3,618 to $three,733 for workers with one kid, from $5,980 to $6,164 for workers with two children, and from $half-dozen,728 to $half dozen,935 for workers with three or more children. The earned income required to claim the maximum EITC is also adjusted annually for inflation. For 2022, information technology'south $x,980 if you have one child ($10,640 for 2021), $fifteen,410 if you have two or more children ($14,950 for 2021), and $vii,320 if you take no children ($vii,100 for 2021).
The EITC stage-out ranges are adapted each year to account for aggrandizement, too. For 2022, the credit starts to phase out for articulation filers with children if the greater of their adapted gross income (AGI) or earned income exceeds $26,260 ($25,470 for 2021). It's completely phased out for those taxpayers if their AGI or earned income is at to the lowest degree $49,622 if they have one child ($48,108 for 2021), $55,529 if they have 2 children ($53,865 for 2021), or $59,187 if they accept three or more children ($57,414 for 2021). For other taxpayers with children, the 2022 phase-out ranges are $20,130 to $43,492 for people with ane child ($19,520 to $42,158 for 2021), $20,130 to $49,399 for people with ii children ($xix,520 to $47,915 for 2021), and $20,130 to $53,057 for people with more than than ii children ($nineteen,520 to $51,464 for 2021). If you don't have children, the 2022 phase-out range is $fifteen,290 to $22,610 for joint filers ($14,820 to $21,920 for 2021) and $nine,160 to $xvi,480 for other people ($8,880 to $xv,980 for 2021).
Finally, the limit on a worker'southward investment income is increased to $10,300 ($10,000 for 2021).
Recovery Rebate Credit
Americans were thrilled terminal March to hear they were getting a third stimulus cheque in 2021. Those checks were for upwards to $ane,400, plus an additional $one,400 for each dependent in your family. (Apply our Tertiary Stimulus Check Calculator to run across you how much money y'all should have gotten.) Only some people who were eligible for a tertiary-round stimulus check didn't receive a payment or got less than what they should have received. For those people, relief was bachelor in the form of a 2021 tax credit known as the recovery rebate credit.
However, there are no stimulus check payments in 2022. As a outcome, there is no recovery rebate credit for the 2022 taxation year.
Revenue enhancement Brackets
Although the tax rates didn't change, the income tax brackets for 2022 are slightly wider than for 2021. The difference is due to inflation during the 12-month period from September 2020 to Baronial 2021, which is used to effigy the adjustments.
2022 Tax Brackets for Single/Married Filing Jointly/Head of Household
| Tax Rate | Taxable Income (Single) | Taxable Income (Married Filing Jointly) | Taxable Income (Caput of Household) |
| 10% | Upward to $10,275 | Upward to $20,550 | Upward to $14,650 |
| 12% | $x,276 to $41,775 | $20,551 to $83,550 | $14,651 to $55,900 |
| 22% | $41,776 to $89,075 | $83,551 to $178,150 | $55,901 to $89,050 |
| 24% | $89,076 to $170,050 | $178,151 to $340,100 | $89,051 to $170,050 |
| 32% | $170,051 to $215,950 | $340,101 to $431,900 | $170,051 to $215,950 |
| 35% | $215,951 to $539,900 | $431,901 to $647,850 | $215,951 to $539,900 |
| 37% | Over $539,900 | Over $647,850 | Over $539,900 |
Long-Term Majuscule Gains Revenue enhancement Rates
Tax rates on long-term capital gains (i.e., gains from the auction of capital avails held for at least i year) and qualified dividends did not alter for 2022. However, the income thresholds to authorize for the various rates were adapted for aggrandizement.
In 2022, the 0% rate applies for individual taxpayers with taxable income up to $41,675 on single returns ($40,400 for 2021), $55,800 for head-of-household filers ($54,100 for 2021) and $83,350 for joint returns ($80,800 for 2021).
The 20% charge per unit for 2022 starts at $459,751 for singles ($445,851 for 2021), $488,501 for heads of household ($473,751 for 2021) and $517,201 for couples filing jointly ($501,601 for 2021).
The xv% rate is for filers with taxable incomes between the 0% and 20% suspension points.
The 3.eight% surtax on net investment income stays the same for 2022. It kicks in for single people with modified AGI over $200,000 and for joint filers with modified AGI over $250,000.
For more on long-term uppercase gains revenue enhancement rates, see What Are the Capital Gains Tax Rates for 2021 vs. 2022?
Standard Deduction
The standard deduction amounts were increased for 2022 to account for inflation. Married couples become $25,900 ($25,100 for 2021), plus $i,400 for each spouse age 65 or older ($1,350 for 2021). Singles can claim a $12,950 standard deduction ($12,550 for 2021) — $14,700 if they're at least 65 years onetime ($14,250 for 2021). Head-of-household filers get $19,400 for their standard deduction ($eighteen,800 for 2021), plus an boosted $one,750 in one case they achieve age 65 ($1,700 for 2021). Bullheaded people tin can tack on an extra $1,400 to their standard deduction ($1,350 for 2021). That jumps to $1,750 if they're unmarried and non a surviving spouse ($1,700 for 2021).
Charitable Gift Deductions
The "above-the-line" deduction for up to $300 of charitable cash contributions ($600 for married couple filing a joint render) expired at the end of 2021. Equally a result, it isn't bachelor for the 2022 tax year (it was available for 2020 and 2021). Only people who claimed the standard deduction on their revenue enhancement return (rather than claiming itemized deductions on Schedule A) were allowed to take this deduction.
The 2020 and 2021 suspension of the 60%-of-AGI limit on deductions for cash donations by people who itemize also expired, so the limit is back in place starting with the 2022 revenue enhancement year.
1099-Yard Forms
Starting with the 2022 tax year, third-political party payment settlement networks (e.one thousand., PayPal and Venmo) will send you a Course 1099-Chiliad if you are paid over $600 during the yr for goods or services, regardless of the number of transactions. Previously, the grade was just sent if y'all received over $20,000 in gross payments and participated in more 200 transactions. The gross amount of a payment doesn't include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other amounts.
This change to the reporting threshold means more than people than e'er will get a 1099-K form side by side year that they will apply when filling out their income revenue enhancement returns for the 2022 tax year. However, remember that 1099-1000 reporting is simply for money received for goods and services. It doesn't use to payments from family unit and friends.
Retirement Savings
Here's some skillful news for retirees: The IRS updated the table used to summate required minimum distributions (RMDs) to account for longer life expectancies commencement in 2022. That means RMDs should exist a bit smaller starting in 2022 than they were before.
For people who are still saving for retirement, many fundamental dollar limits on retirement plans and IRAs are college in 2022. For case, the maximum contribution limits for 401(k), 403(b) and 457 jumps from $xix,500 to $20,500 for 2022, while people built-in earlier 1973 can once once again put in $half-dozen,500 more as a "catch-upwardly" contribution. The 2022 cap on contributions to Unproblematic IRAs is $fourteen,000 ($13,500 in 2021), plus an actress $3,000 for people age 50 and upwardly.
The 2022 contribution limit for traditional IRAs and Roth IRAs stays steady at $6,000, plus $1,000 as an boosted catch-up contribution for individuals age 50 and upwardly. Even so, the income ceilings on Roth IRA contributions went up. Contributions phase out in 2022 at adjusted gross incomes (AGIs) of $204,000 to $214,000 for couples and $129,000 to $144,000 for singles (up from $198,000 to $208,000 and $125,000 to $140,000, respectively, for 2021).
Deduction phaseouts for traditional IRAs likewise get-go at higher levels in 2022, from AGIs of $109,000 to $129,000 for couples and $68,000 to $78,000 for unmarried filers (up from $105,000 to $125,000 and $66,000 to $76,000 for 2021). If only one spouse is covered by a programme, the phaseout zone for deducting a contribution for the uncovered spouse starts at $204,000 of AGI and ends at $214,000 (they were $198,000 and $208,000 for 2021).
More lower-income people may exist able to claim the "saver's credit" in 2022, likewise. This revenue enhancement interruption can be worth upwards to $one,000 ($2,000 for articulation filers), only you must contribute to a retirement account and your adjusted gross income (AGI) must be beneath a certain threshold to qualify. For 2022, the income thresholds are $34,000 of adjusted gross income (AGI) for single filers and married people filing a dissever render ($33,000 for 2021), $68,000 for married couples filing jointly ($66,000 for 2021), and $51,000 for head-of-household filers ($49,500 for 2021).
Adoption of a Child
For 2022, the adoption credit tin be taken on up to $14,890 of qualified expenses ($14,440 for 2021). The full credit is available for a special-needs adoption, fifty-fifty if it costs less. The credit begins to phase out for filers with modified AGIs over $223,410 and disappears at $263,410 ($214,520 and $254,520, respectively, for 2021).
The exclusion for company-paid adoption aid was likewise increased from $14,440 to $fourteen,890 for 2022.
Teacher Expenses
For the 2022 taxation yr, teachers and other educators who dig into their own pockets to purchase books, supplies, COVID-nineteen protective items, and other materials used in the classroom can deduct upward to $300 of these out-of-pocket expenses ($250 for 2021). The maximum deduction for 2022 jumps to $600 for a married couple filing a joint return if both spouses are eligible educators – just non more than $300 each.
An "eligible educator" is anyone who is a kindergarten through 12th course teacher, teacher, advisor, master, or aide in a schoolhouse for at least 900 hours during a school year. Homeschooling parents can't take the deduction.
This is an "higher up-the-line" deduction. So, you don't accept to itemized to claim information technology.
Kiddie Tax
The kiddie tax has less seize with teeth in 2022. The first $1,150 of a child's unearned income is tax-costless if the child is 18 years sometime or younger, or a full-time pupil nether 24. The next $one,150 is taxed at the child'southward rate. Any excess over $2,300 is taxed at the parent's rate. (For 2021, but the starting time $1,100 was exempt and the side by side $1,100 was taxed at the kid's rate.)
Parking and Transportation Benefits
Employers can provide a fiddling more to their workers in 2022 when it comes to parking and transportation-related fringe benefits. The 2022 cap on employer-provided tax-free parking goes up from $270 to $280 per month. The 2022 exclusion for mass transit passes and driver vans is also $280 ($270 in 2021).
Bonds Used for Education
The income caps are higher in 2022 for tax-free EE and I bonds used for instruction. The exclusion starts phasing out above $128,650 of modified AGI for couples and $85,800 for others ($124,800 and $83,200 for 2021). It ends at modified AGI of $158,650 and $100,800, respectively ($154,800 and $98,200 for 2021). The savings bonds must be redeemed to help pay for tuition and fees for college, graduate school or vocational school for the taxpayer, spouse or a dependent.
Americans Working Away
U.South. taxpayers working abroad accept a larger strange earned income exclusion in 2022. It jumped from $108,700 for 2021 to $112,000 for 2022. (Taxpayers claim the exclusion on Form 2555.)
The standard ceiling on the foreign housing exclusion is also increased from $15,218 to $15,680 for 2022 (although overseas workers in many loftier-toll locations around the world authorize for a significantly higher exclusion).
Payroll Taxes
The Social Security annual wage base is $147,000 for 2022 (that's a $4,200 hike from 2021). The Social Security tax charge per unit on employers and employees stays at vi.2%. Both workers and employers go along to pay the 1.45% Medicare taxation on all bounty in 2022, with no cap. Workers likewise pay the 0.nine% Medicare surtax on 2022 wages and cocky-employment income over $200,000 for singles and $250,000 for couples. The surtax doesn't hit employers, though.
The nanny tax threshold went up to $2,400 for 2022, which was a $100 increase from 2021.
Standard Mileage Rates
The 2022 standard mileage rate for concern driving rose from 56¢ to 58.5¢ a mile. The mileage assart for medical travel and military machine moves too increased from xvi¢ to 18¢ a mile in 2022. Nevertheless, the charitable driving rate stayed put at 14¢ a mile — it's fixed by law.
Long-Term Care Insurance Premiums
The limits on deducting long-term care insurance premiums are higher in 2022 for i age group. Taxpayers who are age 61 to lxx tin deduct up to $4,510 for 2022, which is a $ten decrease from the 2021 amount.
The 2022 deduction limits for all age groups are the same equally the 2021 amounts. Hither'southward the complete list of limits by age:
- 40 years quondam or less = $450
- 41 to l years former = $850
- 51 to threescore years quondam = $one,690
- 61 to 70 years old = $4,510
- 71 years of historic period or older = $five,640
For most people, long-term care premiums are medical expenses deductible only past itemizers on Schedule A. Withal, cocky-employed people tin can deduct them on Schedule 1 of the 1040.
Health Savings Accounts (HSAs)
The annual cap on deductible contributions to wellness savings accounts (HSAs) rose in 2022 from $3,600 to $3,650 for self-just coverage and from $7,200 to $7,300 for family coverage. People born before 1968 can put in $1,000 more than (aforementioned as for 2021).
Qualifying insurance policies must limit out-of-pocket costs in 2022 to $xiv,100 for family health plans ($xiv,000 in 2021) and $7,050 for people with private coverage ($seven,000 in 2021). Minimum policy deductibles remain at $two,800 for families and $i,400 for individuals.
Flexible Spending Accounts (FSAs)
For 2022, the limit on employee contributions to a healthcare flexible spending business relationship (FSA) is $ii,850, which is $100 more than the 2021 limit. If the employer'due south plan allows the carryover of unused amounts, the maximum carryover amount for 2022 is $570 ($550 for 2021).
On the other paw, workers can't contribute as much to a dependent intendance FSA in 2022 equally they could in 2021. Last yr, as a COVID-relief measure, a family could sock away up to $10,500 in a dependent care FSA without paying tax on the contributions. But for 2022, the normal limit of $5,000-per-yr on tax-free contributions applies once again.
Alternative Minimum Tax (AMT)
In that location'southward good news for anyone worried about getting striking with the alternative minimum tax: AMT exemptions ticked upwards for 2022. They increased from $114,600 to $118,100 for couples and from $73,600 to $75,900 for single filers and heads of household. The phaseout zones for the exemptions outset at higher income levels for the 2022 taxation year as well — $1,079,800 for couples and $539,900 for singles and household heads ($1,047,200 and $523,600, respectively, for 2021).
In add-on, the 28% AMT revenue enhancement rate kicks in a bit college in 2022 — above $206,100 of culling minimum taxable income. The charge per unit applied to AMTI over $199,900 for 2021.
Tax "Extenders"
At that place'south a group of tax breaks that are constantly scheduled to expire, only that keep getting extended by Congress for some other year or ii. These taxation breaks are collectively referred to as "taxation extenders."
Simply then far, Congress hasn't passed legislation to renew the "revenue enhancement extender" deductions and credits that expired at the end of 2021. Most of the expired revenue enhancement breaks were for businesses, but the following expired taxation breaks impacted individual taxpayers:
- Mortgage insurance premiums deduction;
- Health coverage tax credit for medical insurance premiums paid by certain Trade Adjustment Assistance recipients and people whose pension plans were taken over by the Pension Benefit Guaranty Corporation;
- Nonbusiness free energy belongings credit for certain energy-saving improvements to your home (e.g., new energy-efficient windows and skylights, exterior doors, roofs, insulation, heating and air conditioning systems, water heaters, etc.);
- Fuel cell motor vehicle credit;
- Alternative fuel vehicle refueling belongings credit; and
- Two-wheeled plug-in electric vehicle credit.
At some point, lawmakers may swoop in and extend some or all of these taxation breaks once once again every bit they take in the past. They sometimes even make the extensions retroactive, so the tax breaks list above could still be available for the 2022 tax yr. We'll merely have to wait and encounter what Congress decides to practise with these "tax extender" deductions and credits – stay tuned for time to come developments.
Self-Employed People
If y'all're self-employed, at that place are a couple of 2022 revenue enhancement constabulary changes that could impact your bottom line. First, a central dollar threshold on the 20% deduction for pass-through income was increased for 2022. Self-employed people (along with owners of LLCs, S corporations and other pass-through entities) tin deduct twenty% of their qualified business income, subject to limitations for individuals with taxable incomes in excess of $340,100 for joint filers and $170,050 for others ($329,800 and $164,900, respectively, for 2021).
Second, taxation credits that were allowed for cocky-employed people who couldn't work for a reason that would have entitled them to pandemic-related sick or family leave if they were an employee accept expired and aren't available for the 2022 taxation year.
Estate & Gift Taxes
The lifetime estate and gift revenue enhancement exemption for 2022 jumped from $11.vii million to $12.06 one thousand thousand — $24.12 million for couples if portability is elected by timely filing IRS Course 706 after the death of the first-to-die spouse.
The special estate revenue enhancement valuation of existent estate likewise increases for 2022. For the manor of a person dying this year, up to $1.23 million of farm or business organisation real estate can receive discount valuation (up to $1.xix 1000000 in 2021), letting the manor value the realty at its electric current use instead of fair market value.
More estate tax liability qualifies for an installment payment tax suspension, besides. If ane or more than closely held businesses make upwardly greater than 35% of a 2022 estate, as much as $656,000 of revenue enhancement can be deferred and the IRS will charge only ii% interest (up to $636,000 for 2021).
Finally, the annual gift tax exclusion for 2022 rises from $15,000 to $16,000 per donee. So, yous tin can give up to $sixteen,000 ($32,000 if your spouse agrees) to each child, grandchild or any other person in 2022 without having to file a gift taxation return or tap your lifetime estate and gift revenue enhancement exemption.
Source: https://www.kiplinger.com/taxes/tax-law/603037/tax-changes-and-key-amounts
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