The 2022 Tax Code Adjustments Are Out…But Are They Reliable?

The Journal of Accountancy has released these 2022 tax rates from the IRS:

The 2022 standard deduction will be $12,950 for single taxpayers (and married individuals filing separate returns), $25,900 for married taxpayers filing jointly, and $19,400 for heads of household, which for 2021 are $12,550, $25,100, and $18,800, respectively.

Other changed amounts for 2022 (arranged by Code section order) include:

  • Unearned income of minor children (“kiddie tax”): For tax years beginning in 2022, the amount used to reduce the child’s net unearned income is $1,150.
  • Maximum capital gains 0% rate: $83,350 taxable income for married couples filing jointly, $41,675 for single taxpayers and married individuals filing separately, $55,800 for heads of household, and $2,800 for an estate or trust.
  • Maximum capital gains 15% rate: $517,200 for joint returns or surviving spouses, $258,600 for married individuals filing a separate return, $488,500 for heads of household, $459,750 for all other individuals, and $13,700 for an estate or trust.
  • Alternative minimum tax exemption amounts: $118,100 for joint returns or surviving spouses, $75,900 for single individuals, $59,050 for married individuals, and $26,500 for estates and trusts.
  • Certain expenses of elementary and secondary schoolteachers: The maximum deduction is $300.
  • Cafeteria plans: The dollar limitation for voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,850.
  • Sec. 199A deduction for qualified business income: The threshold amount is $340,100 for married couples filing jointly, $170,050 for married individuals filing separately, and $170,050 for all others. The phase-in range amount is $440,100 for married couples filing jointly, $220,050 for married individuals filing separately, and $220,050 for all others.
  • Interest on education loans: Phases out with modified adjusted gross income (MAGI) exceeding $70,000 ($145,000 for joint returns) and is completely phased out at MAGI of $85,000 ($175,000 for joint returns).
  • Limitation on use of cash method of accounting: The gross receipts test of Sec. 448(c) (also applicable to several other business provisions) is met if average annual gross receipts for the three-tax-year period ending with the 2022 tax year do not exceed $27,000,000.
  • Foreign earned income exclusion: The exclusion amount is $112,000.
  • Unified credit against estate tax: The basic exclusion amount for decedents dying in 2022 is $12,060,000.
  • Annual exclusion for gifts: The first $16,000 of gifts to any person are not included in total taxable gifts under Sec. 2503 made during 2022.

Usually when this information is released each year it is a “done deal.”  However, this year the IRS has cautioned that with legislation pending in Congress that might affect 2022 tax returns, taxpayers should consult future IRS guidance to determine if the adjusted amounts in Rev. Proc. 2021-45 will remain applicable in 2022.  This, like so much of the tax code (and almost everything else, it seems) over the last couple years, seems to be fluid until further notice.

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