New Limits in 2022 Despite No New Tax Legislation
Since the election in 2020, there has been a lot of time and attention spent reporting on potential tax changes that might be passed into law by Congress. However, by the end of 2021, none of the various proposed bills were able to garner enough votes in both the House and Senate.
While the opportunity for passing new laws is still something to monitor, there are a few things to take note of this year, due to the existing rules set forth in the Tax Cuts and Jobs Act of 2017:
- The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900, up $800 from 2021. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.1
- The annual gift tax exclusion amount rises to $16,000 in 2022, which is an increase of $1,000 over what was allowed in 2021. The lifetime estate and gift tax exemption amount also increases this year. Individuals can now gift up to $12.06 million (married couples up to $24.12 million).1
- Although contribution limits on Individual Retirement Accounts (IRAs) has not changed for 2022, the limits on contributions to workplace retirement plans has increased by $1,000 this year. Individuals can now contribute up to $20,500 ($27,000 if you are 50 years or older in 2022). The maximum total contribution, including employer matching, increased by $3,000, to $61,000 ($67,500 for employees over 50 years old).1
- The year 2022 is the last in which you can utilize the 100% bonus depreciation rules for assets acquired and placed in service. Starting in 2023, the bonus percentage begins to decline annually until 2026 when it will be only 20%, unless Congress passes new legislation. Since this is the last year of the maximum percentage, it may be a good time to consult with your tax advisor if you are thinking about purchasing a high cost piece of equipment for your business.1
As you can see, even though none of the considered proposals made it into law in 2021, there are still opportunities to increase your savings and plan for the future. The start of the year is a great time to check in with your financial advisor to see how these new limits may affect your situation.
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- Certain information contained herein was derived from third party sources, as indicated, and has not been independently verified. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any information presented. Where such sources include opinions and projections, such opinions and projections should be ascribed only to the applicable third party source and not to WFS.
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