The 2022 tax filing season has begun. In addition, there are certain new tax changes to be aware of, such as inflation adjustments and phase-outs from the COVID era. Here is a list of things to consider as you get ready to file your 2022 tax return.
Your 2022 tax return must be submitted by April 18, 2023.
For taxpayers who are married and filing jointly in 2022, the standard deduction is $25,900. It is $12,950 for single taxpayers (and married individuals filing separately).
The seven marginal tax rates are still in place, but the income bracket ceilings will increase in 2022 to reflect inflation.
Even if you choose to take the standard deduction, you may still deduct up to $300 ($600 if you’re married filing jointly) in charitable contributions that are “above the line.”
The baseline exemption amount for estates of people who pass away in 2022 is $12.06 million, an increase from $11.7 million from the previous year.
Marginal rates and tax brackets
There are seven marginal tax rates at the federal level, much like the previous few years: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The income requirements do, however, rise from 2021 to 2022. The following is a list of tax brackets for 2022:
Tax Rates and Brackets for 2022
| 2022 Tax Rate | Single Filers | Married Filing Jointly | Heads of Household |
|---|---|---|---|
| 10% | $0 to $10,275 | $0 to $20,550 | $0 to $14,650 |
| 12% | $10,275 to $41,775 | $20,550 to $83,550 | $14,650 to $55,900 |
| 22% | $41,775 to $89,075 | $83,550 to $178,150 | $55,900 to $89,050 |
| 24% | $89,075 to $170,050 | $178,150 to $340,100 | $89,050 to $170,050 |
| 32% | $170,050 to $215,950 | $340,100 to $431,900 | $170,050 to $215,950 |
| 35% | $215,950 to $539,900 | $431,900 to $647,850 | $215,950 to $539,900 |
| 37% | $539,900 or more | $647,850 or more | $539,900 or more |
Typical Deductions
The part of your income that is exempt from income tax is the standard deduction. If you don’t itemize your deductions on Form 1040 Schedule A, you can claim the standard deduction. The standard deduction was substantially quadrupled for 2018 by the Tax Cuts and Jobs Act (TCJA); these modifications end after 2025. The standard deduction amounts for the 2022 tax year are listed below by filing status:
| Standard Deductions 2022 | |
|---|---|
| Filing Status | 2022 Standard Deduction |
| Single | $12,950 |
| Married Filing Separately | $12,950 |
| Heads of Household | $19,400 |
| Married Filing Jointly | $25,900 |
| Surviving Spouses | $25,900 |
Deductions Itemized
The standard deduction is the easier option for the majority of taxpayers. It makes sense to itemize, though, if your itemized deductions are worth more than your basic deduction. For 2022, not much has changed, however keep in mind the following:
- State and local taxes (SALT): A total of $10,000 may be deducted for state and local property, income, and real estate taxes.
- Mortgage interest deduction: You may write off up to $750,000 in mortgage interest (or $1 million if you purchased the home before December 16, 2017).
- Donations to charities: For 2022, the 100% of AGI cap on cash donations still applies. Keep in mind that you must choose this limit on your Form 1040; it is not automatic. 4
- Medical costs: You may write off medical costs that total more than 7.5% of your AGI.
- Deductions for other expenditures: Unless you take a deduction for unreimbursed employee expenses, you can no longer deduct other itemized expenses.
Rates of Capital Gains Tax
With the TCJA, long-term capital gains were given a different tax treatment. The tax brackets for capital gains were very similar to the tax brackets for income before 2018. But the TJCA included distinctive capital gains tax brackets:
| Long-Term Capital Gains Tax Rates for 2022 | |||
|---|---|---|---|
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
| Single | Up to $41,675 | $41,676 to $459,750 | Over $459,750 |
| Head of Household | Up to $55,800 | $55,801 to $488,500 | Over $488,500 |
| Married Filing Jointly | Up to $83,350 | $83,351 to $517,200 | Over $517,200 |
| Married Filing Separately | Up to $41,675 | $41,676 to $258,600 | Over $258,600 |
Infant Tax Credit
For each eligible dependent kid, American taxpayers are eligible for the Child Tax Credit. The maximum refundable part of the credit in 2022 is $1,500, with the credit amount per eligible child being $2,000 in total.
The Child Tax Credit was boosted under the American Rescue Plan of 2021 from $2,000 to more than $3,000, and it was distributed via Advance Child Tax Credit payments, which are not considered income and won’t be included on your 2021 tax return. The payments, however, are predicated on the IRS’s projections for your 2021 Child Tax Credit. When completing your 2021 tax return in 2022, you might need to pay back any excess benefits you received if you weren’t entitled to them.
A different minimum tax
To ensure that higher-income taxpayers pay at least a minimal amount of income tax, the alternative minimum tax (AMT) places restrictions on certain tax advantages. The federal AMT was established in 1963 after Congress learned that 155 high-income households were qualified for so many deductions that they had no federal income tax burden at all, according to the Tax Foundation.
High-income earners are required to determine their tax liability twice, once under the ordinary income tax system and once under the AMT, and pay the highest of the two amounts. There are two AMT rates: 26% and 28%. The AMT phase-outs and exemptions for 2022 are listed below:
AMT Caps in 2022
| 2022 Exemption | 2022 Phaseout | |
|---|---|---|
| Single | $75,900 | $539,900 |
| Heads of Household | $75,900 | $539,900 |
| Married Filing Jointly | $118,100 | $1,079,800 |
The individual income tax statutes of five states—California, Colorado, Connecticut, Iowa, and Minnesota—include an alternative minimum tax (AMT).
Contributions to Charities
Even if you used the standard deduction when you filed your taxes in 2021, the CARES Act permits a $300 ($600 if you’re married filing jointly) above-the-line deduction for cash contributions to designated organizations. Additionally, the law eliminates the restriction on cash contributions of 60% of AGI for those who itemize, allowing them to be deducted up to 100% of AGI. Donations to supporting organizations and donor-advised funds are not acceptable.
The cap on cash contributions of 100% of AGI does not apply automatically. If you don’t choose the new limit, the standard (lower) limit will be used. Your selection can be made on Form 1040 or Form 1040-SR.
Limits on 401(k) Plan Contributions
For 2022, the maximum contribution to employer retirement plans such 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan (TSP) of the federal government is $20,500.
For 2022, the catch-up contribution cap for workers 50 and older is $6,500. The following plans are subject to the catch-up cap:
- Excluding SIMPLE 401(k)s, the 401(k)
- 403(b)
- SARSEP
- 457(b)
For 2022, the maximum contribution to SIMPLE retirement plans is $14,000, with a $3,000 catch-up limit for persons 50 and older for both years.
Limits on IRA Contributions
For 2022, the $6,000 annual contribution cap applies to both Roth and regular IRAs. For people over 50, there is an additional $1,000 catch-up contribution. If a taxpayer satisfies certain requirements, they may deduct payments to a conventional IRA. The deduction may be scaled back or eliminated if the person or their spouse participated in a workplace retirement plan during the year. The phase-outs of the deduction do not apply if neither the taxpayer nor their spouse are participants in an employer-sponsored retirement plan.
The following phase-out ranges are for 2022:
- The phase-out range for single taxpayers covered by a workplace retirement plan is $68,000 to $78,000.
- The phase-out range for married couples filing jointly is $109,000 to $129,000 when the spouse making the IRA contribution is covered by an employment retirement plan.
- If a married couple’s combined income is between $204,000 and $214,000, the deduction for an IRA donor who is not covered by a job retirement plan but is married to someone who is begins to phase out.
- The phase-out range for a married person filing a separate return who is protected by a workplace retirement plan is $0 to $10,000 in 2022 and is not subject to an annual cost-of-living adjustment.
Contributions to a Roth IRA are not tax deductible. The income phase-out range for taxpayers making contributions to a Roth IRA is $129,000 to $143,000 for singles and heads of household in 2022. There are also income restrictions on the amount you can contribute to a Roth IRA. The income phase-out range for married couples filing jointly is $204,000 to $214,000.
Savings Credit
The saver’s credit, a dollar-for-dollar reduction of the taxes you owe, may be available to people with low to moderate earnings. If their AGI is within certain limits, people who contribute to an IRA, 401(k), or any other qualified retirement account are eligible for the credit.
For married couples filing jointly in 2022, the ceiling on income for the saver’s credit, also known as the retirement savings contributions credit, is $68,000; for heads of household, it is $51,000; and for singles and married people filing separately, it is $34,000.
Distributions at a Minimum Required (RMDs)
For 2020, defined contribution programs like profit sharing and 401(k) plans were exempt from required minimum distributions (RMDs) for IRAs. If you turned 712 years old in 2019 as well, this also includes your first RMD.
RMDs, however, are back for 2022. (and beyond). By April 1 of the year after the year you turn 70-1/2, you must begin making withdrawals from your IRA, SIMPLE IRA, SEP IRA, and retirement plan funds.
During the account owner’s lifetime, there are no required minimum distributions for Roth IRAs. You can leave the money alone if you don’t need it and let your heirs’ account to grow tax-free.
Credit for Earned Income
The earned income tax credit (EITC) is a refundable tax credit that lowers the amount of tax that lower-income taxpayers must pay, dollar for dollar. Taxpayers may be qualified for a refund if they are eligible for a refundable tax credit even though they have no tax liability for the year. The EITC AGI ceilings and maximum credit amounts for 2022 are as follows:
Except if you don’t have children, in which case you’ll have a tougher difficulty qualifying (and earn a lesser credit if you do), the income restrictions and maximum credits don’t alter much for 2022:
EITC till 2022
| Dependents | Single or Head of Household | Married Filing Jointly | Maximum EITC |
|---|---|---|---|
| 0 | $16,480 | $22,610 | $560 |
| 1 | $43,492 | $49,622 | $3,733 |
| 2 | $49,399 | $55,529 | $6,164 |
| 3 | $53,057 | $59,187 | $6,935 |
Limits on HSA Contributions
For 2022, there is a $2,850 cap on the amount that can be deducted from an employee’s salary in order to fund a health flexible spending account (FSA).
Individuals with self-only coverage in a medical savings account (MSA) must have an annual deductible that ranges from $2,450 to $3,700 as of tax year 2022. Self-only coverage has a maximum out-of-pocket cost of $4,950.
For 2022, individuals with family coverage must have an annual deductible of $4,950 to $7,400. The out-of-pocket expense cap for family coverage is $9,050.
Annual Gift Exclusion and Estate Tax Exemption
The basic estate tax exemption threshold for decedents who pass away during the tax tear is $12.06 million in 2022.
For 2022, the annual exclusion for gifts is $16,000.
When Do I Have to File My 2022 Tax Return?
The 2022 tax return is due on April 18, 2023, on a Monday. By submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, you can obtain an automatic six-month extension.
The Standard Deduction for 2022 is what?
On Form 1040 Schedule A, taxpayers have the option of taking the standard deduction or itemizing their deductions. Following are the 2022 standard deductions:
- $12,950 for those who are unmarried or married but filing separately.
- $19,400 for household heads
- Survivors’ exemption is $25,900 for taxpayers who are married and file jointly.
What Is the Exemption from Estate Tax for 2022?
The majority of estates are too small to be subject to the federal estate tax, which only kicks in if the decedent’s estate’s assets are valued at $12.06 million or more in 2022. Be aware that there are additional estate taxes in around a dozen states.
Should I Use Tax Software or Hire a Tax Preparer?
The vast majority of Americans pay a tax preparer to complete their tax returns. However, tax preparation and filing has become simpler thanks to tools like TurboTax. Cost may have a role in the choice: In general, using tax software is less expensive than employing a tax expert. The intricacy of your return (take the professional way if you have a business, experienced a significant life event, or wish to itemize), your tax expertise, and your schedule should all also be taken into account. In general, if you prepare your own return, you’ll save money but not time. Going with a tax expert will typically save you time but not money. Of course, it should also be considered that a skilled tax preparer can wind up saving you more cash than they charge you for their services.
The conclusion
It is beneficial to be aware of the most recent numbers because IRS inflation adjustments aim to keep federal taxes consistent with inflation. Keeping track of current tax law changes, particularly those unrelated to inflation, is also beneficial. Planning for the 2022 tax year and beyond might be made easier if you have the most recent information.
When large storms and other natural catastrophes occur, the IRS frequently extends the deadlines for reporting taxes and making payments. To find out if you qualify, consult the IRS’s announcements regarding disaster relief.
