The new year is here and with it comes changes in tax law. Every year, tax laws are updated, and this year is no different. It's important to stay up to date on the latest tax laws so you can ensure you're filing your taxes accurately and taking advantage of any potential savings. Here's what you need to know about the new tax laws for 2022.
Tax Brackets and Rates
The first thing to know about the new tax laws for 2022 is the tax brackets and rates. The IRS has released the new tax brackets and rates for the 2022 tax year. The brackets are slightly different from the 2021 tax year, with the highest marginal tax rate increasing from 37% to 39.6%. The new tax brackets for single filers are as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 39.6%. For married couples filing jointly, the brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Standard Deduction and Personal Exemptions
Another important change to note is the increase in the standard deduction and personal exemptions. For 2020, the standard deduction is $12,400 for single filers and $24,800 for married couples filing jointly. For 2021, the standard deduction has increased to $12,550 for single filers and $25,100 for married couples filing jointly. Additionally, personal exemptions have increased from $0 in 2020 to $4,550 in 2021.
Child Tax Credit
The child tax credit has increased from $2,000 to $3,000 for children under the age of 17 in 2021. Additionally, the phase-out for the child tax credit has been increased from $200,000 for married couples filing jointly to $400,000. This means that the tax credit is available to more families than ever before.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) has also been expanded for 2021. The credit has been increased from $3,000 to $6,660 for taxpayers with three or more qualifying children. This means that more families with lower incomes can take advantage of this credit to reduce their tax liability.
Changes to Retirement Savings
The new tax laws for 2022 also include changes to retirement savings. The limit for 401(k) and IRA contributions has been increased from $19,500 and $6,000 respectively in 2020 to $19,500 and $6,000 in 2021. Additionally, the catch-up contribution limit for those age 50 and older has been increased from $6,500 to $7,000 for 401(k)s and from $1,000 to $1,000 for IRAs.
Changes to Homeownership
The new tax laws for 2022 also include changes to homeownership. The mortgage interest deduction has been increased from $750,000 to $800,000 for both single and married taxpayers. Additionally, the homeowner tax credit has been expanded to include up to $2,000 for those who purchased a home after December 31, 2020. The credit is available to those whose incomes are under a certain threshold.
Conclusion
The new tax laws for 2022 are definitely something to keep an eye on if you plan on filing your taxes this year. Knowing the new tax brackets, deductions, credits, and other changes can help you make sure you're filing your taxes correctly and taking advantage of any potential savings. If you have any questions about the new tax laws or need help filing your taxes, it's best to consult a tax professional who can provide you with the best advice for your situation.
