Getting Ahead of Your 2022 Taxes
By Mitchell J. Smilowitz, CPA
This is a great time to begin planning for your 2022 taxes. 2021 taxes are out of the way, but all the information you need is available. Your 2021 return is a good basis for thinking about how to minimize what you will owe Uncle Sam in 2022. While Congress may pass legislation changing the rules on the tax programs described below, here are some points to consider based on current tax law. Of course, the best way to reduce your taxes is to increase your contributions to your JRB retirement account.
Adjust Your Tax Withholding
If you received a larger tax refund than you expected or made a larger payment to the IRS than you anticipated, it might be time to update your Form W4. Receiving a large refund is like giving Uncle Sam an interest-free loan. Making a large payment at the end of the year may require taking money out of savings; if you owe too much, the IRS can penalize you for failing to withhold a sufficient amount.
To give you an idea of how much you may owe in taxes next year, take a look at the following table showing marginal tax rates for federal income taxes. If you need assistance interpreting this table, please contact us at 888-JRB-FREE (572-3733).
| Marginal Tax Rates | Single | Married Filing Jointly |
| 10% | Less than $10,275 Income | Less than $20,550 Income |
| 12% | Over $10,275 | Over $20,550 |
| 22% | Over $41,775 | Over $83,550 |
| 24% | Over $89,075 | Over $178,150 |
| 32% | Over $170,050 | Over $340,100 |
| 35% | Over $215,950 | Over $431,900 |
| 37% | Over $539,900 | Over $647,850 |
Income Limits for Popular Tax Credits and Deductions
The following table shows how the dollar amounts of frequently used tax credits and deductions change for the 2022 tax year. We highlight the Child Tax Credit, the Child and Dependent Care Credit and the Charitable Deduction for Cash Contributions because they decline in 2022. Temporarily increased as a way to minimize the financial impact of the pandemic on American families, Congress did not reauthorize the expanded value of these provisions for the 2022 tax year.
| Tax Provision | 2021 | 2022 |
| Standard Deduction | ||
| Married filing jointly | $25,100 | $25,900 |
| Single or married filing separately | $12,550 | $12,950 |
| Single head of household | $18,800 | $19,400 |
| Annual Gift Exclusion | $15,000 | $16,000 |
| Charitable Deduction for Cash Contributions1 | $300/$600 | $0 |
| Child and Dependent Care Credit2 | $4,000/$8,000 | $1,050/$2,100 |
| Child Tax Credit3 | $3,000/$3,600 | $2,000 |
| Mileage Rate for Business | 56¢/mile | 58.5¢/mile62.5¢/mile4 |
| Mileage Rate for Medical or Moving Purposes | 18¢/mile | 18¢/mile22¢/mile4 |
| Mileage Rate for Charitable Purposes | 14¢/mile | 14¢/mile4 |
| Qualified Transportation Benefit | $270/month | $280/Month |
| Teacher Expenses | $250 | $300 |
1The deduction for up to $300 of charitable cash contributions ($600 for married couples filing a joint return) expired at the end of 2021. In 2022, charitable deductions are only available to those who itemize.
2The value of the Child and Dependent Care Credit declines in 2022 and is once again non-refundable. The maximum credit is reduced to $1,050 for one child/dependent and $2,100 for two or more. Finally, the full Child and Dependent Care Credit will only be allowed for families making less than $15,000 a year in 2022. After that, the credit starts to phase-out.
3The Child Tax Credit increased in 2021, but this change was temporary. As a result, the child tax credit reverts back to its pre-2021 form. That means the 2022 credit amount drops back down to $2,000 per child for children up to age 16. In addition, there will be no monthly advance payments of the credit.
4The IRS raised the mileage allowance by four cents, to 62.5¢/mile, for the business use of cars beginning July 1, 2022. The rate for using a car to get medical care or for qualified moving expenses also increases by four cents to 22¢/mile beginning July 1. The rate for driving on behalf of charitable organizations remains unchanged for the second half of 2022 at 14¢/mile.
The pandemic saw the value of several popular tax credits and deductions, such as the Child Tax Credit, Child and Dependent Care Credit and Charitable Deduction for Cash Contributions, increase. Thus far in 2022, Congress has not extended these larger tax benefits. As November’s Congressional elections approach, Congress may feel more pressure to expand these popular middle class tax provisions. If you have questions about how to prepare during this fluid policy environment, please email us or call 888-JRB-FREE (572-3733).
June 2022