2022 Tax Updates - YouTube

Welcome to WCS Money Tutorials. Today’s topic is 2022 Tax Updates. Most of these updates  

are adjustments for inflation. The screens in this video will show both 2021 and 2022  

values. I will not read everything from the screen. I will just point out the important  

points or changes that would affect most  people. You can freeze any of the screens  

to examine the other changes more fully. The standard deduction increases to $12,950 for  

single taxpayers, $19,400 for head of household,  and $25,900 for married couples filing jointly.

The additional standard deduction is  added to the basic standard deduction  

for taxpayers who are at least 65 years of  age or blind. This deduction has increased  

to $1750 for singles and head of households,  and $1400 for married or surviving spouses.

You must file an income tax return if your  taxable income exceeds your standard deduction.  

People who can claim the additional standard  deduction will have higher income threshold  

requirements. Note that you may have to file a  tax return even if your income is less than your  

standard deduction. For instance, if you have  received advance premium tax credit payments  

to lower your health insurance premiums under  the Affordable Care Act, then you must file a tax  

return to reconcile those payments. Moreover, you  must file a tax return to claim certain credits,  

such as the earned income tax credit. These are the upper limits for taxable income  

brackets. So a single person earning more than  $539,900 in 2022 would pay a tax rate of 37% on  

that amount exceeding the upper limit for the 35%  bracket. There is also a marriage penalty for the  

35% and especially for the 37% bracket, meaning  that spouses would pay more income taxes than they  

would if they each filed as single taxpayers. These are the adjustments for the long-term  

capital gains rate. The 0% rate applies roughly to  people in the 10% or 12% tax bracket while the 15%  

bracket applies to people in the 22% to 35%  brackets for ordinary income. However, the 20%  

capital gains bracket starts well below the 37%  income tax bracket, so people in the upper portion  

of the 35% bracket will also pay the highest  long-term capital gains rate of 20%. For instance,  

for a married couple filing jointly, the 20%  long-term capital gains rate starts at $517,201  

while the 37% bracket for income taxes starts at  $647,850, a difference of more than $130,000.

Moreover, if your income exceeds $200,000,  or $250,000 if married filing jointly,  

which is not adjusted for inflation, then there  is an additional Net Investment Income Tax of  

3.8%. So, some people in the 15% bracket  may also have to pay the 3.8% surtax.

The adoption credit has been increased to  $14,890 for those whose modified adjusted  

gross income does not exceed $263,410. However,  the credit starts phasing out at $223,410,  

meaning that people within that  range receive a smaller credit.

The earned income tax credit is potentially  the largest refundable tax credit, meaning  

that you can receive this credit even if your tax  liability is less than the credit. The portion  

exceeding your tax liability is simply refunded. The minimum age limit for childless taxpayers who  

can claim this credit has been reduced from 25  to 19 and the maximum age limit of 65 has been  

eliminated, so senior citizens may also claim  this credit, even if they do not have children.

The Social Security wage base has been increased  to $147,000 for 2022, so employees with incomes  

exceeding this amount will not have to pay Social  Security taxes on that excess amount. However,  

the wage base is higher for self-employed  people because they can deduct the employer  

portion of the payroll taxes, which means that the  self-employed will pay the highest Social Security  

tax when their income equals $159,177 in 2022. If you are younger than full retirement age and  

collecting Social Security, then you may have  to pay taxes on your Social Security if your  

earnings from work exceed $19,560 in 2022. For  the year when you reach full retirement age,  

the amount increases to $51,960. The limits on contributions to health  

savings accounts will increase to $3650 for  single coverage and $7300 for family coverage.

The contribution limits to IRA  accounts will not change in 2022.

However, income limits for making contributions  by taxpayers not covered by an employer plan  

have been increased. The limits for taxpayers  

or their spouses who are eligible for  an employer plan have also increased.

The base contribution for SIMPLE  IRAs has increased to $14,000.

The annual employee compensation limit that can  be used as a basis for non-elective contributions  

by the employer has increased to $305,000. The limit for retirement contributions to 401(k)  

and related plans has also increased. The maximum  employee contribution limit increases to $20,500.

The modified adjusted gross income limits for  the Retirement Savings Contribution Credit,  

sometimes known as the Saver's  Credit, has also increased.  

The credit percentage depends on  modified adjusted gross income.

If your income is near the boundaries of these  credit percentages, then you can qualify for  

a higher percentage rate if you make deductible  contributions to a qualified retirement account,  

since such deductions lower your adjusted  gross income. You can still receive this  

credit if you contribute to a Roth account, but  the contributions will not lower your AGI, so,  

in this case, it could be much more beneficial  to contribute to a traditional IRA rather than  

a Roth IRA if you can lower your AGI enough  to qualify for a higher credit percentage.  

The same deductible contributions may also  increase your Premium Tax Credit used to  

purchase health insurance under the Affordable  Care Act, and it may also increase other credits.

Trust and estates must also pay taxes on  income and capital gains. The tax bracket  

percentages for trusts and estates are  similar to the tax brackets for people,  

but there are fewer brackets, and the brackets  start at much lower incomes. For instance,  

the 37% tax rate applies to trust taxable  income exceeding a mere $13,450 in 2022  

and $13,700 for the 20% long term capital  gains tax. The 3.8% Net Investment Income Tax  

also applies to investment income taxed  at 20%, yielding a net tax of 23.8%.

The gift tax annual exclusion  increases to $16,000.

The unified tax credit is used to  offset taxes that would otherwise  

apply to gratuitous transfers, such as gifts  and bequests. This credit has been increased  

so that taxpayers may exclude $12,060,000 of  gratuitous transfers from gift or estate tax.

Remember, for 2021, you can claim a deduction  of up to $300 for cash contributions  

made to a qualifying charity, or $600  for married couples filing joint returns.  

Unlike regular charitable contributions, you can  use this special deduction without itemizing.

Starting in 2023, cryptocurrency  brokers, such as Coinbase,  

will be required to keep records of their  customers and their transactions and report  

them to the IRS in the same way that stockbrokers  must report stock transactions. Customer names,  

addresses, and phone numbers must be disclosed  along with gross proceeds from sales or any  

capital gains or losses of cryptocurrencies. Businesses receiving payments of $10,000  

or more in cryptocurrency must report the identity of the sender to the government.  

This is basically the same law that applies to cash transactions of $10,000 or more.

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