A new year is right around the corner, and now is the time for taxpayers to look at their 2022 tax position. Each tax year is different, and there are some key considerations for 2022 taxes.
As with everything today, the tax brackets are adjusted for inflation. Here are the 2022 and 2023 rates by taxpayer.
2022 Tax Bracket
| Tax Rates |
Married Filing Joint/Surviving Spouse
|
Single |
Head of Household |
Married Filing Separate |
Estate & Trusts |
| 10% |
$0 to $20,550 |
$0 to $10,275 |
$0 to $14,650 |
$0 to $10,275 |
$0 to $2,750 |
| 12% |
$20,550 to $83,550 |
$10,275 to $41,775 |
$14,650 to $55,900 |
$10,275 to $41,775 |
|
| 22% |
$83,550 to $178,150 |
$41,775 to $89,075 |
$55,900 to $89,050 |
$41,775 to $89,075 |
|
| 24% |
$178,150 to $340,100 |
$89,075 to $170,050 |
$89,050 to $170,050 |
$89,075 to $170,050 |
$2,750 to $9,850 |
| 32% |
$340,100 to $431,900 |
$170,050 to $215,950 |
$170,050 to $215,950 |
$170,050 to $215,950 |
|
| 35% |
$431,900 to $647,850 |
$215,950 to $539,900 |
$215,950 to $539,900 |
$215,950 to $323,925 |
$9,850 to $13,450 |
| 37% |
$647,850 + |
$539,900 + |
$539,900 + |
$323,925 + |
$13,450 + |
2023 Estimated Tax Brackets
| Tax Rates |
Married Filing Joint/ Surviving Spouse |
Single |
Head of Household |
Married Filing Separate |
Estate & Trusts |
| 10% |
$0 to $22,000 |
$0 to $11,000 |
$0 to $15,700 |
$0 to $11,000 |
$0 to $2,900 |
| 12% |
$22,000 to $89,450 |
$11,000 to $44,725 |
$15,700 to $59,850 |
$11,000 to $44,725 |
|
| 22% |
$89,450 to $190,750 |
$44,725 to $95,375 |
$59,850 to $95,350 |
$44,725 to $95,375 |
|
| 24% |
$190,750 to $364,200 |
$95,375 to $182,100 |
$95,350 to $182,100 |
$95,375 to $182,100 |
$2,900 to $10,550 |
| 32% |
$364,200 to $462,500 |
$182,100 to $231,250 |
$182,100 to $231,250 |
$182,100 to $231,250 |
|
| 35% |
$462,500 to $693,750 |
$231,250 to $578,125 |
$231,250 to $578,100 |
$231,250 to $578,125 |
$10,550 to $14,450 |
| 37% |
$693,750 + |
$578,125 + |
$578,100 + |
$578,125 + |
$14,450 + |
2022 Individual Tax Considerations
Itemization and Standard Deduction Considerations for 2022
- The $300 cash contribution deduction has ended for those who do not itemize provided through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Unless you are itemizing in 2022, you can no longer take charitable contributions as a deduction.
- Those who refinanced in the early 2020s may not have itemized in the past, but it is important to consider itemizing with an increase in mortgage interest upon refinance.
Retirement Considerations for 2022
- Setting Every Community Up for Retirement Enhancement (SECURE) Act has removed the restrictions for maximum age limits on making traditional IRA contributions if you have earned income. The maximum traditional contribution is $6,000 with a catch-up contribution of $1,000 for those 50 and older.
- Always consider whether your retirement plans have required minimum distributions, and be sure to take the amounts required by the end of the year to avoid penalties.
- If you have lower income in the current year and would like to limit taxable income in the future, you could consider a Roth IRA rollover. This will increase taxable income in the current year but will remove tax liability on future distributions from your retirement account.
Estate and Gift Tax Considerations for 2022
- The exclusion for estate and gift taxes remains high at $12.06 million with an annual exclusion of $16,000 per taxpayer, per beneficiary. High-net-wealth individuals worried about the amount of tax your beneficiaries may have to pay might consider taking advantage of the steady exclusion amounts and utilize the current year’s gift tax limitation.
2022 Business Tax Considerations
Tax Cuts and Jobs Act (TCJA) Considerations for 2022
Lawmakers have not extended the provisions of the TCJA which expire in 2025. There is no way to say if they will extend these or not, so take advantage of the following before they run out.
- Bonus depreciation allows for accelerated depreciation on assets purchased in the current year. Qualifying asset purchases could expense the entire basis of an asset in 2022.
- Qualified Business Income Deduction is still in effect for those with qualifying pass-through entities and that meet certain income limitations; meaning you can omit taxes on 20% of your qualified business earnings.
Other Business Considerations
- With the pandemic behind us, more businesses are going back to traveling for work and their “pre-pandemic” business activities. Consider your business travel expenses as a part of your deductions and tax planning.
- For 2021 and 2022 only, the enhanced business meal deduction allows for 100% of meals purchased from a restaurant with an owner or employee present to be deducted. These meals cannot be lavish or extravagant.
- Under the CARES Act, employers were entitled a deferral of the employer paid Social Security Tax. If you deferred these payments the remaining 50% must be paid by January 3, 2023. To avoid penalties, interest, and IRS notices, be sure your payroll providers make these payments timely.
Final Thoughts
Outside of tax law, here are some other tips to save money on 2022 taxes.
- Provide information on big life changes to your tax professional before they begin preparing your return. (Ex. New family member, large purchases, new income sources, etc.)
- Provide all received tax documents to your tax preparer, and let them know of any documents yet to be received.
- Send in financial statements that are clean and precise.
The above items will save you from spending more on your preparation than necessary and allows your tax professionals to focus on the important tax saving matters.
Have questions? We would love to help!
If you have any questions or would like additional information about anything mentioned, please comment below or email us at askus@lgt-cpa.com.