****THE FOLLOWING IS IMPORTANT INFORMATION
This is an outline of some of the biggest changes to the new tax law that went into effect beginning in 2018 and are still in effect.
The current 7-tier tax bracket will be reduced to four tax brackets. They are as follows:
10% - Income $0 to $10,275
12% - Income $10,276 and up $41,775
22% - Income $41,776 to $89,075
24% - Income $89,076 to $170,050
32% - Income $170,051 to $215,950
35% - Income $215,951 to $539,900
37% - Income $539,001 and up
10% - Income $0 to $20,550
12% - Income $20,551 to $83,550
22% - Income $83,551 to $178,150
24% - Income $178,151 to $340,100
32% - Income $340,101 to $431,900
35% - Income $431,901 to $647,850
37% - Income $647,851 and up
This next section is particularly important to your deductions as taxpayers.
The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900, up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
The American Rescue Plan, which was enacted in March 2021, provided an increased credit for 2021 only. For 2022's tax filing the credit is back to $2,000 per child. It is available to families with dependent children in the home under the age of 17 and phases out for married couples with incomes above $400,000 and for unmarried parents with incomes exceeding $200,000.
A handful of states are stepping forward and offering further credits. New York has a refundable credit worth $100 per qualifying child or 33 percent of the taxpayer’s allowable federal credit, whichever is greater. New York’s credit is not available to children under the age of 4 years. Also the income limitation is $75,000 (single) and phases out at $200,000 and $110,000 (joint) Income phasing out at $200,000.
CHILD AND DEPENDENT CARE CREDITS:
The American Rescue Plan also made significant improvements to the child and dependent care credit. But, again, the changes only apply to the 2021 tax year (although President Biden wants to make the enhancements permanent).
If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit on your 2022 taxes of up to 35% of:
In addition, the full child and dependent care credit will be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $438,000 will receive at least a partial credit.
Required Minimum Distributions (RMDs) are in play for 2022. Anyone who is at least 72 years old by the end the year is required to take an RMD for 2021. Also please note that if you have an inherited IRA you may be required to make these distributions as well.
The following are the limits for contributions to retirement plans. The maximum contribution limits for 401(k), 403(b) and 457 plans increase to $20,500, while people aged 50 or older can once again put in $6,500 more as a "catch-up" contribution. The 2022 cap on contributions to SIMPLE IRAs also stays the same at $14,000, plus an extra $3,000 for people age 50 and up.
The 2022 contribution limit for traditional IRAs and Roth IRAs also stays steady at $6,000, plus $1,000 as an additional catch-up contribution for individuals age 50 and up. However, the income ceilings on Roth IRA contributions went up. Contributions phase out in 2022 at adjusted gross incomes (AGIs) of $204,000 to $214,000 for couples and $129,000 to $144,000 for singles (up from $196,000 to $206,000 and $124,000 to $139,000, respectively, for 2020).
Deduction phaseouts for traditional IRAs also start at higher levels in 2021, from AGIs of $109,000 to $129,000 for couples and $68,000 to $78,000 for single filers.
This is the area that had the most dramatic changes from the 2018 tax law. The new law raised the standard deduction and therefore limited or eliminated most taxpayers ability to effectively use itemized deductions. Itemized deductions are things like medical expenses, state and local taxes, mortgage interest, property and personal property taxes and charitable contributions. If these deductions add up to more than your allotted standard deductions then you are allowed to use those to your benefit instead of the standard deduction.
The tax law change eliminated unreimbursed employee job expenses. Therefore any expenses pertaining to work earned through w2 employee income is not deductible anymore.
The following deductions remain:
The following are the deductions which the 2018 new tax laws eliminated :