What’s New In 2022?
Here are some key changes to the tax code for 2022. Use this information to help understand your 2022 tax obligations and how it may change from last year’s (2021) tax return:
New in 2022:
Reporting of digital payments expands dramatically:
If you receive more then $600 in digital payments the IRS deems it to be business related, you will receive
1099-Ks this January. So, if you use reseller platforms, receive digital payments through applications like Venmo, or digitally resell tickets, expect a more complicated tax return.
Increased tracking of virtual currency:
More stringent reporting of cryptocurrency transactions to the IRS by brokers and dealers begins in 2023. Please be aware that many of these firms are implementing the changes throughout 2022.
Increased teacher deduction:
The deduction for out-of-pocket classroom supplies for teachers is $300, up from $250. If you’re married, you can deduct up to $600.
High efficiency home improvement credits extended:
Qualifying high efficiency home improvements now qualify for an annual $1,200 credit, up from a $500 maximum lifetime credit. Energy efficient heat pump water heaters, central air conditioners, wood stoves, and natural gas or oil furnaces and boilers qualify for a $2,000 credit.
Last Chance For Small Business Tax Rules:
Two popular rules are currently set to expire at the end of 2022 unless extended by Congress. Both involve small business expense deductibility.
100% meal deductibility:
Business meals are typically only deductible at 50%. To help aid restaurants recover from the pandemic, you may deduct 100% of qualified meal expenses thru 2022.
100% bonus depreciation:
This is the final year that qualified business assets can be completely expensed using the 100% additional first year bonus depreciation. The bonus depreciation decreases to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026 before expiring after December 31,2026.
Other Key Changes:
Charitable giving deductions:
The deduction for charitable giving for taxpayers that no longer itemize is no longer available in 2022. This is the $300 reduction in income for single filers ($600 for married taxpayers) is now expired. You may only deduct qualified charitable deductions on your if you itemize on your tax returns AND all qualified deductions exceed $12,950 if single and $25,900 if married filing jointly.
Child tax credit:
The advance payment of one half of this credit is gone and the dollar amount for each qualifying child rolls back to the 20202 limits of $2,000 per child. Last year you could receive as much as $3,600 per child.
Dependent care credit:
The maximum tax credit you can earn for qualified childcare expenses is $1,050 for one qualifying individual (down from $4,000) or $2,100 for two or more qualifying individuals (down from $8,000).
Mortgage insurance premium deductibility:
This itemized deduction is back on the shelf for 2022 unless it is again extended by Congress. The 2017 Tax Cuts and Jobs Act eliminated this deduction, but it was reinstated by Congress as an itemized deduction through the end of 2021.
Now is the time to review your situation to determine how theses and other changes will impact your tax ret
urn in 2022.
Funding Retirement and Your Child’s Education
Saving enough for retirement can be tough even during the best economic times. Saving enough for retirement AND your child's education can be even more challenging. With proper planning, though, you may be able to fund your retirement while still offering financial support for your kids' future education costs. Here are some suggestions:
One of the best ways you can help your child is to ensure you won't be a financial burden on them in the future. With nearly two-thirds of Americans retiring before age 65 according to a poll from the Transamerican Center for Retirement Studies, you may end up using your funds to cover your basic needs for as many as 20 or 30 years.
So before trying to figure out how to help pay for your children’s education, first create a game plan for your own retirement by considering the following:
With your retirement roadmap, you can now turn your attention to your child's future education. First, talk with your kids about the three types of post-secondary education options:
Once your child has identified which path they may take, you can start piecing together the total cost. Also consider that in-state public colleges are generally less expensive than private or out-of-state colleges. If your child prefers an out-of-state college, see if they have a reciprocity agreement with your home state.
With the estimated cost of retirement and your child's education in hand, you can start looking for ways to allocate money towards both your retirement accounts and your child's education. Here are some ideas:
Assets in retirement accounts don't affect financial aid
When you complete the Free Application for Federal Student Aid (FAFSA), most money and assets owned by parents impact the student's eligibility for financial aid. However, the value of retirement accounts (including 401 (k)s, Roth IRAs and traditional IRAs*) are often not counted when determining the expected family contribution.
Knowing this, consider prioritizing the funding of these retirement accounts as they may not materially impact college grants and scholarships.
The $7,500 Tax Credit That Isn't
Electric vehicle credit has many new hurdles
In the recently passed Inflation Reduction Act is a highly touted tax credit to incentivize Americans to purchase new or used electronic vehicles. The top line? Practically speaking, YOU CAN'T GET IT.
As written, nearly all the electronic vehicles sold today do not qualify for the new credit that begins in 2023. This is because:
The new electronic vehicle tax credit is a classic example of the continued shift from using income taxes to pay for federal spending to using the tax code to get us to do what the government wants. In this case:
What this means for the average consumer is little to anything. right now. If you have your sights set on getting an electronic vehicle, make the decision without the influence of the credit. If maximizing the credit is important for you, you now need to pay attention to income limits and will need to wait for some time to see if the credit influences manufacturers to change their sourcing and assembly plans.
To qualify for the Clean Vehicle Credit, you must now clear the following hurdles:
New clean cars must have a manufacturer's suggested retail price (MSRP) of no more than $55,000.
New clean vans, pickup trucks, and SUVs must have an MSRP of no more than $80,000.
Used clean vehicles must cost no more than $25,000.
For a new clean vehicle, your adjusted gross income must be less than $150,000 if single, $225,000 if head of household, or $300,000 if married.
For a used clean vehicle, your adjusted gross income must be less than $75,000 if single, $112,500 if head of household, or $150,000 if married.
The final assembly of a new clean vehicle must occur in North America as of August 16, 2022.
Starting in 2023, at least 40% of critical battery minerals and 50% of battery components must be recycled, mined, or manufactured in the U.S.
Many automakers are unsure whether they will be able to meet this criterion as the new law is currently written.
newsletter is issued to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. Be aware that the tax laws contain varying effective dates and numerous limitations and exceptions that cannot be summarized easily. For details and guidance in applying the tax rules to your individual