2022 Tax Information: Everything You Need to Know
As we enter the new year, tax season is once again upon us. This year, individuals and businesses must be aware of changes in tax laws that could significantly impact their finances. With that in mind, here is everything you need to know about 2022 tax information.
Individual Tax Changes
One of the most significant changes involves the standard deduction. In 2022, the standard deduction will increase to $25,500 for married couples filing jointly, $18,000 for heads of household, and $12,750 for single filers. In addition, for those who itemize their deductions, the state and local tax (SALT) deduction is back for 2022, with a maximum limit of $10,000.
Another noteworthy change involves dependent care flexible spending accounts (FSAs). The maximum contribution limit for dependent care FSAs has doubled to $10,500 per year, allowing families to receive a tax break on child care expenses.
Business Tax Changes
Small businesses may be eligible for the Qualified Business Income (QBI) deduction, which will reduce the taxable income of pass-through entities by 20%. Additionally, the business interest expense deduction has been updated for 2022. The limit is now 30% of the business’s adjusted taxable income, which is up from 15% previously.
Another significant change is the Employee Retention Credit. In 2022, eligible employers may qualify for up to $50,000 in credit, per quarter, for retaining employees during the pandemic, even if they were not impacted by business downturns.
Estate Tax Changes
For 2022, the federal estate and gift tax exemption amount will increase to $12.06 million per individual, up from $11.7 million in 2021. The maximum tax rate for estates and gifts remains at 40%. Therefore, it’s essential to engage in proper estate planning to ensure that heirs receive the most substantial amount of assets possible.
Additional Changes
Tax season 2022 also introduces a few other changes that individuals and businesses should keep in mind. Virtual currency transactions must now be reported to the IRS if the total value exceeds $10,000. Also, businesses must now file Form 1099-NEC for all payments made to non-employee service providers over $600.
Conclusion
2022’s tax laws make staying informed more crucial than ever. Individuals and businesses should know what deductions, credits, and exclusions are available to them to reduce their tax bills. With the changes in standard deductions, estate and gift tax exemptions, and bonus credits for retaining employees, it’s essential to plan ahead and take advantage of these opportunities to reduce tax liability and maximize refunds.
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