The 2023 tax submitting deadline is Tuesday, April 18, 2023, which supplies the general public about 100 days to satisfy their tax obligations for 2022 – and hopefully, hold extra of their cash of their pocket on the identical time.
Working with an expert accountant is one of the best ways to curb Uncle Sam’s share of your 2022 earnings. Past that, staying on prime of the Internal Revenue Service’s new guidelines and coverage adjustments may also help flip the tide when the tax invoice comes due for 2022.
New Rules for the 2022 Tax Year
This yr’s tax regulation adjustments might not be earth-shattering, however the ones on the desk can definitely impression your tax submitting expertise. Here’s a snapshot.
IRS pandemic leniency fades away. Taxpayers could also be in for a impolite awakening for 2022 because the nation and the IRS shift again to pre-covid “normal” for a lot of particular person tax credit score and deduction gadgets.
“For example, the American Rescue Plan Act of 2021 temporarily expanded many tax credits by increasing thresholds and eligibility requirements, so an increased number of taxpayers reaped the benefits during the pandemic,” stated Wiss & Company senior tax supervisor Nicole Derosa. “When taxpayers file their 2022 tax returns, they will see fewer refundable tax credits, which will impact their bottom line and potentially result in less of a refund or a higher balance due.”
Parents could take the brunt of these tax break impactors.
“The Child Tax Credit has been restored to its normal credit thresholds,” stated Derosa. “Adjusted gross income limits still apply, so if you make too much money this credit is not applicable. Additionally, the Child and Dependent Care Credit have also been restored to its pre-Covid status.’
Consequently, U.S. taxpayers who received $3,600 per dependent in 2021 for the Childcare Tax Credit will, if eligible, receive $2,000 for the 2022 tax year. The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
The end to the $300 charitable deduction. During the covid-19 pandemic, the IRS permitted taxpayers to lower their overall income by up to $300 when they donated cash to tax-qualified initiatives, Brooks noted. “The above-the-line deduction will not be available going forward,” he stated.
A shift in tax brackets. In 2022, the tax brackets elevated, however tax charges remained the identical.
“That’s good news, as the “change indicates that more taxpayer money is taxed at lower rates than in prior periods,” stated CoinLedger director of tax technique Miles Brooks.
According to JustAnswer licensed public accountant Jeffrey Jackson, main tax bracket adjustments for the 2022 tax yr are as follows:
Marginal tax charges: For the tax yr 2022, the highest tax charge stays 37% for particular person single taxpayers with incomes better than $539,900 ($647,850 for married {couples} submitting collectively).
The different charges are:
35%, for incomes over $215,950 ($431,900 for married {couples} submitting collectively)
32% for incomes over $170,050 ($340,100 for married {couples} submitting collectively
24% for incomes over $89,075 ($178,150 for married {couples} submitting collectively)
22% for incomes over $41,775 ($83,550 for married {couples} submitting collectively)
12% for incomes over $10,275 ($20,550 for married {couples} submitting collectively
“The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly),” Jackson stated.
Changes to the earned earnings credit score. For the Earned Income Tax Credit, eligible taxpayers with no kids who obtained roughly $1,500 in 2021 will now get $500 in 2022.
“The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for the tax year 2021,” Jackson famous.
Standard deduction changes. The normal deduction for married {couples} submitting collectively for the tax yr 2022 rises to $25,900 – that’s up $800 from the prior yr.
For single taxpayers and married people submitting individually, the usual deduction rises to $12,950 for 2022, up $400, and for heads of households, the usual deduction can be $19,400 for the tax yr 2022, up $600.
Alternative Minimum Tax shift. The AMT exemption quantity for the tax yr 2022 is $75,900 and begins to part out at $539,900 ($118,100 for married {couples} submitting collectively for whom the exemption begins to part out at $1,079,800).
“The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200),” Jackson famous.
Estate tax exclusion enhance. Estates of decedents who die throughout 2022 have a primary exclusion quantity of $12,060,000. “That’s up from a total of $11,700,000 for estates of decedents who died in 2021,” Jackson added.
Gift tax exclusion. The annual exclusion for presents rises to $16,000 within the 2022 tax yr,. That determine is up from $15,000 in 2021.
All In All, a Better Year for Taxpayers (Except for Some Refunds)
“2022 tax year changes will decrease the effective tax rate because there will be more deductions and less tax paid on income,” Jackson stated. “That means if a taxpayer earns the same as they did in 2021 they will pay less in taxes.”
“Although, tax refunds will likely be lower for most families because many tax credits expired in 2021.”
Source: www.thestreet.com”