While we wait for the results of yesterday’s elections, we should spend some time thinking about our 2022 tax obligations. Even though the new administration hasn’t passed much this year, there are still changes to take into account.
These items should be understood prior to our final tax planning sessions in December. By no means is this a comprehensive list. just a few of the more relevant items that may affect many of you. So without further pomp, circumstance, or introduction, the following are a few of the tax law changes for this year.
The wage base in 2022 is $147K. It increases next year to $160,200. Once this amount of payroll is surpassed, Medicare taxes are still collected.
These are the largest increases I’ve seen in my career. They’re supposed to provide the Social Security Administration with the additional dollars it needs to continue paying benefits. We’ll see how much more they raise the limit in 2024.
1040 Standard Deduction Increases For 2022
Married Filing Joint – $25,900
Head Of Household – $19,400
Single – $12,950
The maximum Section 179 Deduction in 2022 is $1,080,000.
Gift Tax Exclusion
In 2022, this exclusion is $16K per individual. It goes up to $17K next year.
100% Meals Deduction
For business deductible meals consumed at a sit-down type restaurant, the 100% deduction is still available. If it isn’t extended, it won’t be available in 2023.
Let me leave you with this.
Most are predicting that the GOP will again control the House of Representatives. Currently, the remaining Senate races are too close to call.
My point is that a Lame Duck Congress can be a dangerous or wonderful thing. The party currently in control knows that if they don’t get their bills passed before the new members are sworn in on January 3rd, they can kiss their priorities goodbye.
The following is a partial list of bills that may be forthcoming.
There is strong bi-partisan support for a package of retirement plan reforms. It has already passed the House and is lingering in a Senate sub-committee.
Republican priorities include an extension of the R&D Credit that expires this year. If it isn’t extended, those credits will need to be amortized over five years rather than being deducted from tax bills in the year accrued.
High on the Democrat’s list is an extension of the expanded refundable Child Tax Credit which expired last year. From a planning standpoint, if not extended, your 2022 income tax return may look substantially different.
Either way, the next seven weeks before the new representatives are sworn in may be rather interesting.
We’re all going to get through this. Let’s get through it together.
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