Important Tax Information for the Upcoming Filing Season
As we approach the tax filing deadline, we wanted to remind you of the importance of taxes and provide you with some information on how to be prepared for the changes in tax laws.
Tax laws are constantly changing and staying on top of all the updates can be challenging. Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice, so please speak with your tax professional before modifying your tax strategy.
Some of the fundamental changes that may affect you include the following:
Income tax brackets shifted a bit
There are still seven tax rates, but each rate’s income ranges (tax brackets) have shifted slightly higher.
The standard deduction increased slightly
The following rules for itemized deductions have mostly stayed the same for 2022, but they’re still worth pointing out:
State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 indebtedness. But people who had $1,000,000 of home mortgage debt before December 16, 2017, may still be able to deduct the interest on that loan.
Medical expenses: Only qualified unreimbursed medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2022.
Charitable donations: In 2022, the annual income tax deduction limits for gifts to public charities are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash.
The Child Tax Credit is lower after a one-year bump
In 2021, the American Rescue Plan Act (ARPA) temporarily increased the Child Tax Credit. But in 2022, the credit has returned to $2,000 per child under the age of 17 at the end of the year. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. Other qualified dependents might be able to claim a $500 credit.
The alternative minimum tax (AMT) exemption is higher
For 2022, the AMT exemptions are $75,900 for single filers and $118,100 for married taxpayers filing jointly. The phase-out thresholds are $1,079,800 for married taxpayers filing a joint return and $539,900 for all other taxpayers. Once your income for the AMT hits the phase-out threshold, your AMT exemption begins to phase out at 25 cents for every dollar over the threshold.
The estate tax exemption is even higher
The estate and gift tax exemption, indexed to inflation, has risen to $12.06 million for 2022. But the now-higher exemption is set to expire at the end of 2025, meaning it could be cut in half if Congress does not act.
The annual gift exclusion, which allows you to give money to anyone you want, increases to $16,000 per recipient (up $1,000 from 2021).
Please don't hesitate to contact us if you have any questions or concerns about your tax situation. We may have resources in our offices that might be helpful.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
