After a tumultuous two years with a great deal of shifts and changes, 2022 is anticipated to be a fairly standard tax season once again. Ready or not, be prepared to file by April 15th. While the deadline might be back to normal, it is important to understand exactly what changes have happened over the last couple of years. Our team of tax experts are prepared to answer your questions and concerns to ensure a smooth 2022 tax season.
Standard Deduction Increase
Everyone should be aware of the increase in the standard income deduction. It will be $12,550 for both single taxpayers and married taxpayers filing separately. If you are married and filing jointly, it will be $25,100. The income tax brackets have increased by approximately 3% because of high inflation rates.
Child Tax Credit
Families suffered many hardships during this pandemic, from parents losing their jobs, to schools and day cares closing. These are just few of the many factors that added economic pressure to the American family, along with the mental, physical and emotional toll we all endured. In March 2021, the American Rescue Plan passed and increased stimulus payment amounts from $2,000 per child to $3,600. The payments began in July 2021 and for families that did not receive them, they will be able to claim a portion of this tax credit when they file their 2022 tax return. Please make sure you mention if you received this credit or if for some reason you were ineligible.
Business Deductions
Even as some employees head back to the office for the first time in over a year, remote work is still here to stay. If you are currently working remotely, you may not be entitled to any business deductions such as home office expenses. This specific tax deduction is for individuals who will be filing a 1099 form commonly known as “self-employed.”
There were many changes made to this specific deduction, so it is important to ask if you qualify. Make sure you hold on to all receipts and necessary documents to show proof of business or home office expenses.
Unemployment Benefits
Millions of people lost their jobs since March 2020, which meant unemployment benefits were given out at a higher rate than ever. This, combined with several stimulus payments, provided temporary and much-needed relief for those looking for a new job. However, it’s important to note that these benefits are not all tax-free.
The amount that will be exempted is $10,200. If you earned more than that, be prepared to pay back some taxes. You can contact your state unemployment office and ask them to withhold necessary taxes. Otherwise, set aside some funds to ensure you can pay back a portion when you file in 2022.
Financial Planning Is Where To Begin
Waters Hardy has a team of experts who have been closely monitoring all of the changes that have happened this past year. We are determined to guide you every step of the way in order to make the most out of your tax return. Our experienced tax professionals are ready to assist you with all of your financial questions and concerns. With the 2022 tax season just around the corner, contact us today to successfully plan for your upcoming financial and tax matters!