2022 Tax Law Changes
Thank goodness 2022 is behind us; I'm looking forward to a better 2023! Once tax season is out of the way it should be onward and upward...but first we have to survive it. This is a relatively quiet year for income tax changes and after a few years of upheaval we are certainly grateful for that.
Even so, a few substantial bits of legislation were passed this year which could affect you. In particular, the Inflation Reduction Act and the SECURE Act. We’ll dig into all those changes, plus a few more.
First, let’s kick things off with the important dates you need to know for the 2023 tax season. You can see the expanded list of 2023 tax dates here, but here are the dates individual taxpayers need to know...
- Tuesday, April 18, 2023, is the deadline for individual tax returns.
- Monday, October 16, 2023, is the deadline if you request an extension.
Now that we know when, let's dive into what...
The Inflation Reduction Act
- The 15% corporate tax
- Enhancement of IRS services
- Extension of Affordable Care Act subsidies for certain individuals whose household income exceeds 400% of the poverty line
- Clean energy and efficiency incentives for individuals
- Energy Efficient Home Improvement Credit
- Energy efficient commercial buildings deduction (Section 179D)
- Extensions, increases, and modifications of the New Energy Efficient Home Credit
- Clean Vehicle Credit and credit for previously owned clean vehicles
- Qualified commercial clean vehicles
- Increase in Research Credit against payroll tax for small businesses
We have been diving deep on what all of this means for our clients, but if you really want to nerd out with us, you can get some extra credit reading here: Inflation Reduction Act.
The SECURE 2.0 Act
- Change in the credit for small employer pension plan startup costs
- $2,000 saver’s match
- Changes in pooled employer plans
- Multiple employer 403(b) plans
- Increase in age for required beginning date for mandatory distributions
- Indexing IRA catch-up limit
- Higher catch-up limit to apply at age 60, 61, 62, and 63
- Treatment of student loan payments as elective deferrals for purposes of matching contributions
- Application of credit for small employer pension startup costs to employers who join an existing plan
- Small immediate financial incentives for contributing to a plan
- Withdrawals for certain emergency expenses
- Starter 401(k) plans for employers with no retirement plans
- Improving coverage for part-time workers
- Recovery of retirement plan overpayments
- Tax treatment of IRAs involved in a prohibited transaction
- Clarification of substantially equal periodic payment rule
This act affects not just your 2022 taxes but also your 2023 tax planning, so pay attention to this one. We will know this one top to bottom, but if you want to dissect it yourself here is yet another deep dive on the Secure Act.
Income Brackets and Tax Rates for 2022
Tax planning starts by understanding your tax bracket. Knowing which federal tax bracket you fall under is essential for creating a tax plan for the future. For the 2022 tax year, the tax brackets increased to account for inflation...although this hardly seems to cover it if you do the grocery shopping for your family.
2022 Marginal Income Tax Rates and Brackets
2022 Marginal Tax Rates | Single 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 | $14,651–55,900 | $10,276–41,775 |
22% | $41,776–89,075 | $83,551–178,150 | $55,901–89,050 | $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 $539,900 | Over $647,850 | Over $539,900 | Over $323,925 |
Higher Standard Deductions in 2022
For tax years 2022 and 2023, the standard deduction was also adjusted for inflation.
Filing Status | 2021 | 2022 | 2023 |
Single | $12,550 | $12,950 | $13,850 |
Married Filing Jointly | $25,100 | $25,900 | $27,700 |
Married Filing Separately | $12,550 | $12,950 | $13,850 |
Head of Household | $18,800 | $19,400 | $20,800 |
Deciding whether to take the standard deduction or itemize on your taxes depends on your individual circumstances, but don't worry...we're here to help you get it right.
BEWARE: Lower Refunds Ahead!
- There were no Economic Impact Payments (EIP) in 2022, so taxpayers will not receive an additional stimulus payment in their 2023 tax refund checks.
- Expanded tax credits and deductions such as the Child Tax Credit and Charitable Contributions Deduction have returned to their pre-COVID-19 levels.
That Wasn't So Bad Right?
As you can see, even in a relatively quiet year there is no shortage of new law, but as always we are on top of it so you don't have to be! If you have any questions about the information discussed here just drop us a line.
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