Last week, we started to examine some changes in the tax law for 2022. There actually are quite a few because many tax law items in 2020 and 2021 were “temporary” due to COVID and because of inflation.
Two COVID-19 Employer Tax Credits that are now expired. (Actually, as of September 30, 2021.) The Payroll Credit for Sick and Family Leave Paid by Businesses to Employees. Also, the Employer Retention Tax Credit for businesses that were financially hurt by the pandemic but kept paying wages to employees.
Standard Deductions go up because of inflation. (Some good things because of inflation?) Married couples get $25,900, plus $1,400 for each spouse 65 or older. Singles can claim $12,950, $14,700 if age 65 or up. Heads of household get $19,400 plus $1,750 once they reach 65. There is still an additional Standard Deduction for blind folks. $1,400 per blind person ($1,750 if unmarried and not a surviving spouse). Why does Congress pick on married blind folks?
The Social Security Wage base jumped up $4,200 to $147,000. Any wages paid over that amount are only subject to Medicare Tax of 1.45%.
The maximum 401k contribution is $20,500. If you are 50 years old or older, you can contribute an additional $6,500. The cap on SIMPLE IRAs and SIMPLE 401k rises to $14,000. If you are 50 years or older, you can contribute an additional $3,000.
There are new life expectancy tables to use when computing the Required Minimum Distributions for 2022 and beyond. The revised tables allow distributions to be spread out over more years because they account for more current individual mortality rates than the past tables. Remember, when you have a longer life expectancy in the tables, that means plan participants and IRA owners can take out smaller annual payouts, letting them keep money in their accounts longer.
Teachers can deduct $300 each ($600 for married couples who are both teachers) of supplies for 2022. That’s a whopping increase of $50 from 2021. My isn’t Congress up to date on how much the average teacher spends out of their own pocket for school supplies?
HSA contribution caps increased in 2022. Now $3,650 for self-only coverage and $7,050 for family coverage. Anybody 55 years and older can add an additional $1,000.
The Standard Mileage Rate for 2022 is 58.5₵ per mile.
The life-time estate and gift tax exemption for 2022 jumps up to $12,060,000. The step up in basis to Fair Market Value still exists. You might think this is no big deal, but for small family businesses, this is huge! The “Build Back Better” bill wanted to drop this exemption amount to $5,000,000. That would have required many family businesses to close their doors and liquidate to pay the estate tax of 45% of anything over that exemption amount when the owner dies.
Have you heard? Prov 14:30a says, “A tranquil heart gives life to the flesh…”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.