Taxing questions

What you need to know about filing your 2022 taxes

Compiled by Dr. Phil Brown , chair, department of accounting |

1. Tax rates for 2022 have changed, and the tax brackets are graduated.

For example, single individuals with taxable income of $50,000 appear to be in the 22% tax bracket. However, they will pay 10% on the first $10,275 and 12% on the next $31,500 earned only incurring a 22% tax on the last $8,225. (For more information, visit irs.com.)

2. The traditional IRA and Roth IRA contribution limits are the same as last year. Individuals may contribute up to $6,000 to an IRA. However, individuals age 50 and older are able to contribute an extra $1,000 annually.

3. The 2022 401(k) contribution has been raised to a maximum of $20,500. However, individuals age 50 and older are able to contribute an extra $6,500 annually.

4. The standard deduction has been raised to $12,950 for individuals, $19,400 for single heads of households, and $25,900 for married filing jointly.

5. The 2022 child tax credit returns to $2,000 per child age 16 and younger. The credit is subject to a phase-out starting at taxable income of $200,000 for single filers and $400,000 for married filing jointly. For other qualified dependents, you may claim a $500 credit.

6. The estate tax exemption for 2022 is now $12,060,000. This exemption is scheduled to expire at the end of 2025 when the amount will be cut approximately in half — unless Congress takes action to extend it. In addition, the annual gift exclusion, which allows giving without incurring any tax liability, has been raised to $16,000
per recipient.

7. Are you 72 or older? Be certain you have taken the appropriate amount of required minimum distribution from your retirement accounts prior to the end of the year. (First-year RMDs are granted a one-time exception to draw out by April 1, 2023.) Any undistributed funds below the required minimum will incur a 50% penalty.

Source: irs.com

When should I seek the advice of a tax professional?

• You prefer not to prepare your own taxes.
• You are uncomfortable preparing taxes yourself.
• You seek advanced tax planning and wish to consider future tax consequences prior to making financial decisions.
• You have multiple sources of income and incur a variety of expenses. Some types of income and expenses are granted preferential tax treatment.