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Tax changes for 2021 you need to know before filing

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The 2021 tax season was a little more complicated, thanks to the coronavirus, including giving people who are procrastinators an extra month to file. But, the 2022 tax season will look a bit more normal to you. Well, almost.

There are a few new wrinkles this year, including an increase in charitable giving (if you don’t itemize) and the expanded Child Tax Credit, which will be providing parents with some extra cash.

Those are just a couple of the changes to know when filing your taxes in 2022. Let’s look at more, along with some tips for you to make sure you’re staying within the lines the IRS has painted and that you’re taking advantage of every tax break Uncle Sam is giving you.

2022 tax changes

  • If you circled April 15th on your calendar in red to remind yourself when Tax Day is, get the eraser out and change that date to April 18th. Emancipation Day is being observed in the District of Columbia this year on April 15th, and since it’s a legal holiday there, the IRS can’t require you to file your return that day no matter where you live. The next business day is April 18th, so make sure your return is postmarked by midnight that day.
  • The standard deduction for 2021 increased to $12,550 for individual filers and $25,100 for married couples filing jointly to account for inflation. In 2022 those numbers will rise again to $12,950 and $25,900, respectively.
  • The marginal income tax rates and brackets are changing in 2022. Quick refresher: your tax rate (the percentage of your income you pay in taxes) is based on what tax bracket (income range) you’re in.

The tax rates are actually the same, but there are some slight adjustments to the brackets. They’ve been adjusted by a few hundred dollars to account for inflation, and they now look like this:

2022 marginal income tax rates & brackets

2022 Marginal Tax Rates Single/Unmarried Tax Bracket Married Filing Jointly Tax Bracket Head of Household Tax Bracket Married Filing Separately Tax Bracket
10% $0–10,275 $0–20,550 $0–14,650 $0–10,275
12% $10,276–41,775 $20,551–83,550 $14,651–55,990 $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
  • The standard deductions have also been raised for 2021 and 2022. When you calculate your taxes, you have the choice of either taking the standard deduction or itemizing your deductions (calculating them one by one). It’s more of a hassle to itemize, but it’s worth it if the total amount exceeds the standard deduction.

Here’s what the changes in the standard deduction, which was increased slightly to adjust for inflation, look like:

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

10 tax tips after January 1, 2022

Just because the calendar turned over to 2022 not long ago doesn’t mean there aren’t some steps you can take to help lower your taxes and avoid tax penalties. Here are ten of them.

1. Contribute to retirement accounts

When you file in 2022, the maximum IRA contribution you can make is $6,000 ($7,000 if you’re age 50 or older by the end of the year). If you’re self-employed, the maximum annual contribution to Keoghs and SEPs for 2021 is $58,000.

2. Make your quarterly estimated tax payments

If you had a windfall of income that arrived after August 31, 2021, you can file Form 2210: Underpayment of Estimated Tax. This allows you to annualize your estimated tax liability and possibly reduce any penalties.

3. Organize your records

There are plenty of good tax organization checklists online to help you gather up all of the tax documents you’ll need to complete your tax return.

4. Find the correct tax forms

The best place to find the forms is to go right to the source – online at the IRS website or have them mailed to you. Most of the popular tax software already includes all of the tax forms you’ll need.

5. Itemize your deductions

Yes, it’s easier to take the standard deduction, but you can save a bundle if you can itemize, especially if you own a home, live in a high-tax area, or are self-employed. Many deductions are well known, like those for charitable deductions and mortgage interest. And, don’t forget medical expenses that exceed 7.5% of your adjusted gross income for 2021.

6. Take your home office tax deduction

With many more people going the self-employed route, the eligibility rules have been loosened if you claim a home office deduction. If you don’t have a fixed location for conducting your business, you can claim the deduction if you use your dedicated space for management or administrative activities, even if you don’t meet clients there.

7. Provide dependent taxpayer IDs on your tax return

If you don’t plug in these numbers for your kids or other dependents on your return, the IRS will deny any dependent credits that you’re due, including the Child Tax Credit. This can be a costly error.

8. File and pay on time

If you can’t make the April 18, 2022 deadline, make sure your file Form 4868. You’ll get an extension until October 17, 2022, but you’ll still need to make a payment of a reasonable estimate of your tax liability for 2021 when you submit the form.

9. File electronically

This works best if you expect a tax refund since the IRS is much quicker processing electronic returns than paper returns. Direct deposit of your refund will speed things up even more for you. It’s estimated that in 2022 you’ll have your refund in around 21 days if you file electronically.

10. Decide if you need help

Tax software can be a real money-saver, but if your situation is a bit more complex, you might want to have a professional prepare your tax return for you. It costs more than doing it yourself, but you’ll have added confidence and peace of mind knowing a pro is taking care of you and won’t miss any deductions or credits you may have overlooked (which often pays for the cost of having your return prepared by a professional).

[ Related: 7 financial savvy ways to use your tax refund ]

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published January 27, 2022
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