As the economy still experiences effects from the COVID-19 pandemic, the financial economy is not as predictable as it was previously. As the economy changes, so do your personal finances. This can make several changes to your financial plan for 2022. Keep reading to learn the financial updates in 2022 and what’s ahead.
On November 10th, 2021 the IRS announced adjustments for inflation, for 2022, after the inflation rate had hit a 30 year high. These adjustments will affect standard deductions, tax brackets, and more. The IRS chose to do this to prevent bracket creeping, which is pushing people into higher tax brackets just because of inflation. These will affect your 2023 tax filing but are extremely important to keep in mind for 2022.
The standard deduction will increase by $800 for married couples that file jointly, increasing from $25,100 to $25,900 for 2022. For single filers and married couples that file individually, the standard deduction will increase by $400, going from $12,550 to $12,950. For the head of household, the standard deductions will increase by $600, to $19,400 for 2022. The additional standard deduction for people over the age of 65 will go from $1,350 to $1,400.
Income tax rates aren’t changing for 2022 but the brackets are increasing. This allows for an adjustment for inflation so people are not bumped up to the next tax bracket only because of inflation.
The taxable income levels for capital gains rates are changed as well for 2022. The maximum zero rate taxable income will be $83,350 for married couples filing jointly, $55,800 for head of households, and $41,675 for individual filers. The 15% capital gains rate income levels will be $517,200 for joint filers, $488,500 for heads of households, and $459,750 for individual filers. Any taxable income levels above this are subject to the 20% capital gains rate.
The Child Tax Credit will be making a change as well. In 2022 it will change back to $2,000 per qualifying child with phaseouts starting at a taxable income of $400,000 for joint filers and $200,000 for individual filers. Joint filers will receive no credit at $440,000. The refundable portion of this credit will increase from $1,400 to $1,500 after being adjusted for inflation.
There will also be a change to tax advantaged account contributions. In 2022, you will be able to save an extra $1,000 in your 401(k) account. The contribution limit for Health Savings Accounts increased by $150 to $4,950 for 2022. The family plan maximum increased by $250 to a $7,400 limit.
If you’re concerned how these changes will affect your financial and tax planning for 2022, a knowledgeable advisor can relieve you of that stress. Our advisors at Total Clarity Wealth Management can assist you in setting up a financial plan for your success. Give us a call today to get started!
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
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