The tax rules that apply when filing tax returns seem to change constantly, making it a different process every year.
This year is no different, as tax services start to interpret all the new changes in their task of processing returns for all of their clients.
Whether doing tax returns at home or enlisting the aid of a tax help service, these are the changes that Americans should look out for, as their returns may end up different this year.
- Income Tax Bracket Adjustments - Starting this year, income tax brackets have been adjusted to account for high inflation. Filers should check online or with a tax help service to confirm theirs, as this shift is positively affecting most people’s taxable income, though there are some who are being negatively affected, too.
- Deduction Changes - While itemized deductions for tax returns have remained the same for 2022, the standard deduction has increased. Tax services recommend reviewing this information before assuming that itemizing is more beneficial.
- Child Tax Credit Reduced - The American Rescue Plan Act (ARPA), which temporarily increased the Child Tax Credit to help families dealing with the financial aspect of the COVID-19 pandemic, has come to an end, returning to the standard $2,000 per child in 2022.
- Retirement and Health Savings Contribution Changes - Tax services advise that although IRA contribution limits have remained the same for 2022, 401(k) limits have been increased as have limits for health savings accounts. Speak to a tax help specialist to decide how to get the most from these accounts by investing last-minute, pre-filing funds in the right places.
- Estate Tax Exemption and Gift Exclusion Raised - Starting in 2022 and lasting until 2025, estate tax exemption has been raised once again, this time to $12.06 million. Similarly, the annual gift tax exclusion has also been raised to $16,000 per person starting with tax returns filed in 2022.
- Higher AMT Exemption - The Alternative Minimum Tax (AMT) exemption is also higher in 2022, affecting mainly households with incomes over $500,000; however, that will change in 2025, so tax help experts suggest planning accordingly.
Tax return filing season for 2022 taxes is here and with these many changes on the books, tax services stress the need to review and understand all the changes and to file carefully.
If the many changes seem confusing or a filer is not sure how they are being affected, contact a respected tax help service for guidance or arrange for a professionally prepared tax return!