what do i need to know about the tax bill
12 Min Read | Feb 23, 2022
The coronavirus threw several monkey wrenches into 2021 tax season—including giving all of us procrastinators an extra calendar month to file! Only 2022 tax flavour will be back to business as usual . . . well, sort of.
Some new things this year include an increment in charitable giving deductions (if yous don't itemize) and the expanded Child Tax Credit (parents, y'all noticed some extra greenbacks in your bank account, right?).
Nosotros'll dig into both of those changes, plus a few more, a little later. But outset, let'due south kick things off with the primary details yous demand to know for 2022 taxation season:
- The big revenue enhancement deadline for all federal tax returns and payments isApril eighteen, 2022.
- Thestandard deductionfor 2021 increased to$12,550 for unmarried filers and$25,100 for married couples filing jointly.
- Income tax brackets increased in 2021 to account for inflation.
As for the 2023 revenue enhancement season, here's what you'll desire to know when the time comes:
- The standard deduction for 2022 (which volition be useful when you file in 2023) will increase to $12,950 for unmarried filers and $25,900 for married couples filing jointly.
- The income revenue enhancement brackets will also increase in 2022.
Just that'southward just scratching the surface! Allow'due south break downwardly the details so you can file your taxes with confidence this yr.
Income Brackets and Rates for 2022 and 2023 Tax Season
Here'due south a refresher on how income brackets and revenue enhancement rates piece of work: Yourtax rate (the percentage of your income that you pay in taxes) is based on whattax subclass(income range) you're in.
Taxes shouldn't be this complicated. Let united states help.
For case, if you lot're unmarried and your income is $75,000, and so you're in the 22% tax bracket. But that doesn't hateful your tax rate is a flat 22%. Instead, part of your income is taxed at 10%, another part at 12%, and the terminal part at 22%. (We break it down in the nautical chart below.)
For the 2021 tax year, the taxrates are the same—but there are someslightchanges to the brackets. Basically, the brackets have been adjusted by a few hundred dollars from 2020 to business relationship for aggrandizement.1 2022 taxation brackets as well await a petty different.2
2021 Marginal Income Revenue enhancement Rates and Brackets
| 2021 Marginal Revenue enhancement Rates | Single Revenue enhancement Bracket | Married Filing Jointly Tax Bracket | Head of Household Tax Subclass | Married Filing Separately Tax Bracket |
| x% | $0–9,950 | $0–19,900 | $0–14,200 | $0–nine,950 |
| 12% | $9,951–twoscore,525 | $19,901–81,050 | $xiv,201–54,200 | $9,951–40,525 |
| 22% | $40,526–86,375 | $81,051–172,750 | $54,201–86,350 | $forty,526–86,375 |
| 24% | $86,376–164,925 | $172,751–329,850 | $86,351–164,900 | $86,376–164,925 |
| 32% | $164,926–209,425 | $329,851–418,850 | $164,901–209,400 | $164,926–209,425 |
| 35% | $209,426–523,600 | $418,851–628,300 | $209,401–523,600 | $209,426–314,150 |
| 37% | Over $523,600 | Over $628,300 | Over $523,600 | Over $314,150 |
2022 Marginal Income Tax Rates and Brackets
| 2022 Marginal Revenue enhancement Rates | Single/Unmarried Revenue enhancement Bracket | Married Filing Jointly Revenue enhancement Subclass | Head of Household Revenue enhancement Subclass | Married Filing Separately Tax Subclass |
| ten% | $0–ten,275 | $0–20,550 | $0–14,650 | $0–x,275 |
| 12% | $ten,276–41,775 | $20,551–83,550 | $xiv,651–55,990 | $10,276–41,775 |
| 22% | $41,776–89,075 | $83,551–178,150 | $55,991–89,050 | $41,776–89,075 |
| 24% | $89,076–170,050 | $178,151–340,100 | $89,051–170,050 | $89,076–170,050 |
| 32% | $170,051–215,950 | $340,101–431,900 | $170,051–215,950 | $170,051–215,950 |
| 35% | $215,951–539,900 | $431,901–647,850 | $215,951–539,900 | $215,951–323,925 |
| 37% | Over $539,901 | Over $647,850 | Over $539,900 | Over $323,926 |
Higher Standard Deductions in 2021 and 2022
When you pay taxes, yous have the selection of taking the standard deduction or itemizing your deductions—calculating your deductions one by one. Itemizing is more of a hassle, but it's worth it if your itemized deductions exceed the amount of the standard deduction.
For tax years 2021 and 2022, the standard deduction went up slightly to adjust for inflation.3,4
Standard Deduction
| Filing Status | 2020 | 2021 | 2022 |
| Single | $12,400 | $12,550 | $12,950 |
| Married Filing Jointly | $24,800 | $25,100 | $25,900 |
| Married Filing Separately | $12,400 | $12,550 | $12,950 |
| Head of Household | $18,650 | $18,800 | $19,400 |
Not certain whether or not you lot want to apply a taxation pro this twelvemonth or file yourself? If you are comfortable filing on your own, go right ahead! Simply if things get complicated, you may way to reach out to a tax pro. Keep in heed that every situation is different regarding taking the standard deduction or itemizing.
Tax Deductions and Credits to Consider for Taxation Flavor 2022
The closest things to magic words when information technology comes to taxes aredeductions andcredits. Both assistance you lot go along more money in your pocket instead of Uncle Sam's, but in slightly unlike means.
Tax deductionsassist lower the amount of your income that can actually be taxed. Some deductions are only available if you itemize your deductions, while others are still bachelor even if y'all determine to take the standard deduction.
Taxcredits, on the other manus,are dollar amounts actually subtracted from your revenue enhancement beak, and in that location are two types:refundable andnonrefundable. If a credit is greater than the amount you owe and it's a refundable credit, the difference is paid to you as a refund. Score! If information technology's a nonrefundable credit, your tax pecker will be reduced to zip, but you won't become a refund. Nonetheless a win!
Here are some deductions and credits you might be able to claim on your 2021 revenue enhancement return:
1. Charitable Deductions
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The law allows you to deduct up to100%of your adapted gross income (AGI), which is your total income minus other deductions you have already taken, in qualified charitable donations if yous programme to itemize your deductions.v
What if you're taking the standard deduction? Well, non-itemizers may claim an above-the-line deduction (meaning it is not on Schedule A) of upwards to $300 ($600 for married filing jointly) for charitable contributions made in cash.6
2. Medical Deductions
If yous plant yourself with hefty medical bills last twelvemonth, you might be able to find at to the lowest degree some revenue enhancement relief.
Y'all can deduct any medical expenses above7.5% of your adapted gross income (AGI), which is your total income minus other deductions you have already taken.7 For instance, if your AGI was $100,000, you lot can deduct out-of-pocket medical expensesacross $seven,500 in 2021. But you accept to itemize your deductions in social club to write off those expenses on your tax render.
3. Business organization Deductions
If you lot're self-employed, at that place are a agglomeration of deductions you can claim on your taxation render—including travel expenses and the home function deduction if you use a role of your dwelling to conduct business.viii
Merely if you're one of the millions of workers who were sent home to piece of work remotely, you won't be able to claim the domicile function deduction since information technology's reserved for self-employed peoplebut.Pitiful!
4. Earned Income Revenue enhancement Credit
The EITC is a refundable credit designed to assistance out depression- and middle-income households. The maximum adjusted gross income for a unmarried filer with no children is $21,430, while the cap for a married couple with iii or more children is $57,414.nine Depending on your income, your filing status and number of children, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes. But here's a crazy stat: Well-nigh ane out of v eligible taxpayers either don't claim the benefit on their taxes or don't file a taxation return at all.viii Don't let that exist you!
5. Kid Tax Credit
Got kids? You probably noticed a nice niggling surprise from the IRS in July: gratuitous coin! The American Rescue Programme, which was passed in March 2021, bumped the Kid Revenue enhancement Credit from $2,000 to $iii,600 for each child under age vi and to $3,000 for each kid 6–17. Rather than waiting until tax time for families to claim this credit, the IRS began sending out a portion of the credit through advance monthly payments ($300 per month for each child under 6 and $250 for each child vi to 17).11 The Child Tax Credit is gradually phased out for people with incomes over $150,000 if married filing jointly or $112,500 if filing as caput of household.12
Checks in the postal service are nice, but recollect that taking advance Child Tax Credit payments at present will reduce the corporeality yous get at tax time. Payments are based on your 2020 taxes, then if your income went up enough in 2021 to start endmost in on the phase-out limit for the credit, you might consider opting out of advance payments.
There are plenty of other deductions and credits that might exist upward for grabs depending on your situation! If you lot don't want to miss out on whatsoever tax savings, you'll want to work with a tax advisor who tin make sure you're non leaving anything on the table.
vi. Education Credits
Bettering yourself or your children through teaching is a good thing, and it's fifty-fifty better when you get a revenue enhancement pause.
The American Opportunity Tax Credit (AOTC) is a partially refundable credit for educational expenses for a student for the starting time iv years of college. You can claim up to $ii,500 per student, and if the credit brings your tax liability to nix, xl% (up to $1,000) will be refunded to you.13
The Lifetime Learning Credit (LLC) is not refundable and covers up to $two,000 in qualified educational expenses per return. While you tin can merely take advantage of the AOTC for undergrad expenses, you can reap the benefits of the LLC for expenses related to all kinds of educational opportunities—from degree programs to technical classes to improving job skills.14
But beware: Yous tin can claim both the AOTC and the LLC on your tax return but not for the same student or the same expenses.
The Coronavirus and Your Taxes
Oh, then y'all thought y'all would exist done with the coronavirus in 2022? Unfortunately, the coronavirus has created a ripple effect that volition be felt when yous sit down to file your taxes for terminal year. Here are some things to keep in mind:
Stimulus Checks
As part of the American Rescue Programme Human action of 2021, the IRS sent a third circular of stimulus checks to millions of Americans—up to $1,400 for individuals and an additional $i,400 for dependents.15
The good news is your stimulus checkwillnotcount every bit taxable income. Instead, information technology's beingness treated like a refundable tax credit for 2021. Translation: Your stimulus check will not touch your tax situation or crusade you to have a higher or lower refund.
Paycheck Protection Program (PPP) Loans
The 2020 Coronavirus Assistance, Relief, and Economic Security Human activity tried to help struggling small business owners stay afloat by offering them Paycheck Protection Program (PPP) loans. As long as these loans were used on certain business organisation expenses—payroll, rent or involvement on mortgage payments, and utilities, to name a few—these loans were designed to be "forgiven."16
In December 2020, the IRS announced that whatsoever eligible expenses y'all paid with money from those PPP loanscanbe deducted from your taxable income.17 Then that's a trivial chip of skillful news! PPP ended in May 2021, but call up, y'all'll have to get your loan forgiveness application approved by the Minor Business Administration earlier you're off the claw for the amount you borrowed.
Unemployment Benefits
After the pandemic stalled a large part of the economy, many Americans constitute themselves out of work (at least temporarily) and turned to unemployment insurance for help. Though the first $10,200 of unemployment benefits were made tax-free in 2020, that is not the case in 2021.18 So if you were unemployed in 2021 and did non have taxes withheld from your benefits, plan now to pay taxes on those benefits.
Retirement Plans: 401(k)s, IRAs and More
In that location wereseveral changes to retirement plans in 2021—and some of those changes could impact your taxation bill this year. Let's tackle each of those changes:
- If you own a traditional IRA, youaccept to take money out of your account one time you attain a certain historic period. Those withdrawals are calledrequired minimum distributions (RMDs). The adept news is the SECURE Act changed the age for RMDs from 70 1/2 to 72.xix This actress fourth dimension could lead to significant revenue enhancement savings for retirees with those accounts since the coin that'south taken out of a traditional IRA counts as taxable income.
- The SECURE Act also allows owners oftraditional IRAs to proceed putting money in their accountspast age 70 1/2 as of 2020.xx Since the money you put into a traditional IRA is tax deductible, you could lower how much of your income is taxed this year. Just remember: You volition accept to pay taxes on that money whenever you take it out. Total contributions to all of your traditional or Roth IRAs tin't exceed $6,000 ($seven,000 if you're 50 or older) per year.
If y'all demand aid navigating RMDs and IRAs, it'southward probably a adept idea to achieve out to an investment professional who can walk you through the process.
Become Your Taxes Done Right in 2022
If your taxes are pretty straightforward and you want an easy-to-employ tax software that can give you some peace of mind, check out Ramsey SmartTax! No hidden fees, no advertisements, no games. That's how it should exist!
Simply what if y'all have a more complicated taxation state of affairs or had a wild year in 2021? In that case, working with a taxation pro is a smart move. And if you're looking for a trustworthy taxation expert in your area, our taxation RamseyTrusted Endorsed Local Providers (ELPs) have years of experience and can assist you file your taxes with confidence. Notice a tax pro today!
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File Your Taxes With Confidence
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File Your Taxes With Confidence
Want revenue enhancement software with no hidden fees? Need aid from a taxation pro? We've got you covered!
Explore Tax Services
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