| Many temporary tax laws that were enacted to alleviate taxpayers’ burden during the pandemic have expired. Some of the temporary tax laws were expected to continue through the Build Back Better Act. However, the Build Back Better Act hit an impasse in Congress. There are many changes in tax laws as we enter the year 2022: 1. The child tax credit reverts to pre-2021 rules. There are no more monthly payments. The maximum credit drops from $3,000.00 per child under the age of 18 ($3,600.00 for each child under age 6) to $2,000.00 per child under age 17 for 2022. Only up to $1,500.00 is refundable for 2022 for certain low- income parents. 2. The 2020 and 2021 above the line deduction allowable for cash charitable donations is expired. Starting with tax filing for 2022, taxpayers who do not itemize cannot deduct up to $300.00 in cash donations to charity. The adjusted gross income (AGI) limit of 60% on charitable donations by individuals is back beginning with tax year 2022. 3. The higher earned income tax credit for taxpayers without children is ended. 4. The larger child and dependent care credit for working parents is ended. The maximum credit is $1,050.00 for one child and $2,100.00 for two or more children needing care. The credit for 2021 was $4,000.00 for one child and $8,000.00 for two or more children. 5. The payroll tax credit for sick and family leave paid by businesses to employees affected by the Covid-19 and the employee retention tax credit for businesses have expired. 6. The standard deductions have increased for 2022. Married taxpayers could deduct $25,000.00 plus an additional $1,400.00 for spouses who are 65 years old or older. Head of Household taxpayers get $19,400.00 plus an additional $1,750.00 if they are 65 or older. Single taxpayers get $12,950.00 ($14,700.00 if 65 or older). Taxpayers who are blind get an extra $1,400.00. They get $1,750.00 if unmarried and are not a surviving spouse. 7. The standard mileage rate for businesses increases to 58.5 cents for 2022. 8. Teachers can deduct up to $300.00 of supplies for 2022. The maximum is $600.00 for couples who are teachers. 9. Several tax extenders expired at the end of 2021. Some are: 1)The limited credit for energy-efficient windows and doors added to a residence. 2) The schedule A deduction by taxpayers who itemize for home mortgage insurance premiums. 3) Tax incentives for qualified fuel-cell motor vehicles and two-wheel plug-ins. 4) Some business-related energy credits. Do you know that you could reduce your tax liability by proper tax planning strategies? We offer FREE initial consultation!!! |
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