Although filing your 2021 tax return may still be top of mind, there’s no better time to start planning for the tax changes coming in 2022. Every year brings with it a long list of tax law changes that can affect your bottom line, so it’s important to familiarize yourself with what’s new and what’s changed since last year.
Most of the tax changes that came into play under last year’s COVID relief bills expired at the end of 2021, which means that your 2022 taxes may look quite different. We’ve compiled a list of some of the most important tax law adjustments and changes to help you hold on to more of your money when it’s time to file your 2022 return.
Due to inflation, the income tax brackets for 2022 are slightly wider than in 2021:
|Tax Rate||Taxable Income (Single)||Taxable Income (Filing Jointly)||Taxable Income (Head of Household)|
|10%||Up to $10,275||Up to $20,550||Up to $14,650|
|12%||$10,276 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|
Child Tax Credit
In 2022, the child tax credit goes back to the limits prior to 2021:
- Credit amount decreases to $2,000 per child
- Only children under the age of 17 qualify for the credit
- No monthly advance payments of the credit in 2022
Child and Dependent Care Tax Credit
After significant improvements to the child and dependent care credit in 2021, many of these benefits fall away in 2022. Significantly, the full child and dependent care credit will only be allowed for families earning less than $15,000 a year in 2022.
- Child and dependent care credit is non-refundable
- Maximum credit percentage decreases from 50% to 35%
- Fewer care expenses are eligible for credit
- Credit is only allowed for up to $3,000 in expenses for one child or dependent, and $6,000 for more than one
Long-Term Capital Gains Tax Rates
Tax rates on long-term capital gains and qualified dividends did not change for 2022. However, the qualifying income thresholds have been adjusted for inflation.
|Rate||Singles||Married Filing Jointly||Head of Household|
|0%||Up to $41,675||Up to $83,350||Up to $55,800|
|15%||$41,676 – $459,750||$83,351 – $517,200||$55,801 – $488,500|
The 3.8% surtax on net investment income remains unchanged for 2022. It applies to:
- Single – modified AGI over $200,000
- Joint filers – modified AGI over $250,000
To account for inflation, the standard deduction amounts were increased for 2022:
- Married couples: $25,900, plus $1,400 for each spouse age 65 or older
- Singles: $12,950
- Singles 65+: $14,700
- Head-of-household filers; $19,400, plus an additional $1,750 once they reach age 65
Starting in the 2022 tax year, there are new reporting requirements for third-party payment settlement networks, such as PayPal and Venmo. Anyone who is paid over $600 during the year for goods or services (regardless of the number of transactions) will receive Form 1099-K. This is a significant change from previous years, in which the form was only sent to you if you received over $20,000 in gross payments AND took part in more than 200 transactions.
Remember that 1099-K reporting only applies to money received for goods and services—not payments from family and friends.
Good news for retirees is that the IRS updated the table used to calculate required minimum distributions (RMDs) in 2022 to account for longer life expectancies. For those who are still saving for retirement, several key dollar limits on retirement plans and IRAs are higher in 2022:
- The maximum contribution limits for 457, 401(k), and 403(b) increases to $20,500
- People born before 1973 can add $6,500 extra
- The 2022 cap on contributions to simple IRAs increased to $14,000
- People age 50+ can add an extra $3,000
The contribution limit for traditional IRAs and Roth IRAs stays the same at $6,000, with $1,000 as an additional contribution for individuals age 50+. However, the income ceilings on Roth IRA contributions have increased.
Leave it to the Experts
It’s a long list, we know, but we hope that we’ve managed to alert you to the important changes affecting you or your business. There’s no need to feel overwhelmed—our team of experienced CPAs can work with you to ensure that you create a plan to accommodate these changes. Simply send us a message, and we’ll be in touch.