Apr 22

Back to Basics (April-2022)

This month I’m going back to basics.  There is a batch of tax extenders that expired as of December 31, 2021.  They include the residential energy credits for energy efficient windows and doors, tax incentives for qualified fuel-cell motor vehicles, no more charitable deductions without itemizing, and the maximum child and dependent care tax credit falls back to $1,050, for one child, and $2,100, for two or more children.  This is down from the top 2021, credit of $4,000, for one child and $8,000, for two or more.  The child tax credit reverts back to pre-2021 rules.  This means no more advance monthly payments and the  maximum credit is $2,000, per child, under 17, with a maximum of $1,500, per child, under the additional child tax for some lower income parents.  Standard deductions increase to $25,900, plus $1,000 for each spouse, 65 or older when filing married filing jointly.  $12,950, for singles and if over 65 it goes to $14,700.  Head of Household standard deduction is $19,400, plus $1,750 if over 65.  Tax rates on long-term capital gains and qualified dividends did not change and remains at 0%, 15%, or 20%, based on your taxable income.  Teachers are permitted to deduct $300 per year for books, supplies, and materials which is up from $250.  The income tax brackets for individuals are wider for 2022 and the tax rates remain unchanged.  Contributions to your qualified retirement plans (employer plans) maximum is increased to $20,500 annually.  Maximum traditional and Roth individual arrangements is a combined $6,000 with an additional $1,000, catch-up contribution, for individuals over 65.  Now, how about retirement Required Minimum Distribution (RMD) requirements.  If you are 70½, or older, you are already under distribution rules.  You now need to become aware of the new life expectancy table for calculating your RMDs for 2022 and beyond.  Also, under these new rules and you haven’t started your RMD’s, you’re now not required to take RMDs until the year of 72 years of age.  These new revised tables allow distributions to be spread out over more years resulting in smaller annual payout requirements.  However, you still need to evaluate your tax circumstances and give consideration to your beneficiary tax circumstances to determine what your best tax advantage option will be.  A couple of business items.  Standard mileage rate is 58.5¢ for 2022 and don’t forget you are required to keep a mileage log substantiating the mileage.  There is still a 100% restaurant meal deduction permitted for 2022.  And, one last thought, the market volatility provides a perfect opportunity to fund your Traditional, Roth IRA, maybe start a Self Employed Pension plan.  In closing, to our clients, THANK YOU!!!.  Because of you, our office had another successful tax season.  Also, to the many of you who read my articles, THANK YOU.  I hope it helps.  God Bless you and the United States of America!!!  For additional details and specific assistance in applying the general information in this article, contact your tax advisor or call us at your earliest convenience.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.