Child Tax Credit - 2022 credit amount drops back down to $2,000 per child. Children who are 17 years old don’t qualify for the credit this year, because the former age limit (16 years old) returns. For some lower-income taxpayers, the 2022 credit is only partially refundable, and they must have earned income of at least $2,500 to take advantage of the credit’s limited refundability. And there will be no monthly advance payments of the credit in 2022.
Child and Dependent Care Tax Credit - For 2022, the child and dependent care credit is non-refundable. The maximum credit percentage also drops from 50% to 35%. For 2022, the credit is only allowed for up to $3,000 in expenses for one child/dependent and $6,000 for more than one. In addition, the full child and dependent care credit will only be allowed for families making less than $15,000 a year in 2022. After that, the credit starts to phase-out.
Long-Term Capital Gains Tax Rates - In 2022, the 0% rate applies for individual taxpayers with taxable income up to $41,675 on single returns, $55,800 for head-of-household filers and $83,350 for joint returns. The 20% rate for 2022 starts at $459,751 for singles, $488,501 for heads of household and $517,201 for couples filing jointly. The 15% rate is for filers with taxable incomes between the 0% and 20% break points. The 3.8% surtax on net investment income stays the same for 2022. It kicks in for single people with modified AGI over $200,000 and for joint filers with modified AGI over $250,000.
Standard Deduction - Married couples get $25,900, plus $1,400 for each spouse age 65 or older. Singles can claim a $12,950 standard deduction — $14,700 if they’re at least 65 years old. Head-of-household filers get $19,400 for their standard deduction, plus an additional $1,750 once they reach age 65. Blind people can tack on an extra $1,400 to their standard deduction. That jumps to $1,750 if they’re unmarried and not a surviving spouse.
Charitable Gift Deductions – The “above-the-line” deduction for up to $300 of charitable cash contributions ($600 for married couple filing a joint return) expired at the end of 2021. The 2020 and 2021 suspension of the 60%-of-AGI limit on deductions for cash donations by people who itemize also expired, so the limit is back in place starting with the 2022 tax year.
Retirement Savings - Many key dollar limits on retirement plans and IRAs are higher in 2022. For example, the maximum contribution limits for 401(k), 403(b) and 457 jumps from $19,500 to $20,500 for 2022, while people born before 1973 can once again put in $6,500 more as a “catch-up” contribution. The 2022 cap on contributions to SIMPLE IRAs is $14,000, plus an extra $3,000 for people age 50 and up. The 2022 contribution limit for traditional IRAs and Roth IRAs stays the same. However, the income ceilings on Roth IRA contributions went up. Contributions phase out in 2022 at adjusted gross incomes (AGIs) of $204,000 to $214,000 for couples and $129,000 to $144,000 for singles. Deduction phaseouts for traditional IRAs also start at higher levels in 2022, from AGIs of $109,000 to $129,000 for couples and $68,000 to $78,000 for single filers. If only one spouse is covered by a plan, the phaseout zone for deducting a contribution for the uncovered spouse starts at $204,000 of AGI and ends at $214,000. Lower-income people may be able to claim the “saver’s credit” in 2022, too. This tax break can be worth up to $1,000 ($2,000 for joint filers), but you must contribute to a retirement account and your adjusted gross income (AGI) must be below a certain threshold to qualify. For 2022, the income thresholds are $34,000 of adjusted gross income (AGI) for single filers and married people filing a separate return, $68,000 for married couples filing jointly, and $51,000 for head-of-household filers.
Health Savings Accounts (HSAs) - The annual cap on deductible contributions to health savings accounts (HSAs) rose in 2022 from $3,600 to $3,650 for self-only coverage and from $7,200 to $7,300 for family coverage. People born before 1968 can put in $1,000 more. Qualifying insurance policies must limit out-of-pocket costs in 2022 to $14,100 for family health plans and $7,050 for people with individual coverage. Minimum policy deductibles remain at $2,800 for families and $1,400 for individuals.
Recovery Rebate Credit - There are no stimulus check payments in 2022. As a result, there is no recovery rebate credit for the 2022 tax year.
Tax Brackets – 2022 Tax Brackets for Single/Married Filing Jointly/Head of Household.
This post may not contain a complete analysis of the tax issues discussed herein and does not represent official conclusions or advice regarding the matter.