Common Questions on Tax Preparation
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The deadline for filing your 2022 income tax return or extension form is April 18, 2023. This date is an extension from the typical April 15 deadline due to the observance of the Emancipation Day holiday in the District of Columbia. It's important to note that this applies to all taxpayers, regardless of their place of residence. However, if you reside in Maine or Massachusetts, you have until April 19, 2023, to file your taxes. This extension is due to the Patriots' Day holiday observed in those states.
For the 2023 tax season, the standard deduction amounts will see a slight increase, a practice consistent with previous years. The new standard deduction amounts for 2022 tax returns are provided below. These enhanced standard deductions aim to enable more individuals to file their taxes without the need for itemizing deductions on Schedule A.
The personal exemption for the tax year 2022 continues to be set at 0, as it was for the tax year 2020. The removal of the personal exemption was a provision within the Tax Cuts and Jobs Act.
For tax year 2022, the top tax rate remains at 37%. All other rates are below based on taxable income levels.
There is no restriction on itemized deductions for the 2022 tax returns, much like the years 2018 through 2021. The elimination of this limitation was a direct result of the Tax Cuts and Jobs Act.
The Alternative Minimum Tax (AMT) exemption for the tax year 2022 is set at $75,900. For single taxpayers, the exemption starts to phase out once their Adjusted Gross Income (AGI) exceeds $539,900. On the other hand, for Married Filing Jointly (MFJ) taxpayers, the AMT exemption is $118,100, and the phase-out begins when their AGI surpasses $1,079,800.
The Health Savings Account (HSA) contribution limits for the year 2022 have been raised to $3,650 for individuals with single coverage and $7,300 for those with family coverage.
The enhanced credit for qualifying children under the age of 6 and children under the age of 18 has expired. In 2022, the base Child Tax Credit (CTC) amount is $2,000 for each qualifying child. The phase-out of the credit begins when modified adjusted gross income exceeds $200,000 ($400,000 for joint filers). The refundable portion of the CTC remains limited as it was in 2020, except that the maximum Additional Child Tax Credit (ACTC) amount for each qualifying child has increased to $1,500.
The extended age allowance for a qualifying child has also expired. To qualify as a child, they must be under the age of 17 at the end of 2022.
For residents of Puerto Rico, there is no longer a requirement to have three or more qualifying children to be eligible for the ACTC. Bona fide residents of Puerto Rico may claim the ACTC if they have one or more qualifying children.
Advance Child Tax Credit payments were not issued for the year 2022.
In 2022, the Child and Dependent Care Credit is non-refundable. The maximum credit percentage has decreased from 50% to 35%. Additionally, the range of care expenses eligible for the credit has been reduced. For the tax year 2022, the credit is applicable to a maximum of $3,000 in expenses for one child or dependent and $6,000 for more than one.
Under the new legislation, individuals can still qualify for a tax credit of up to $7,500 when purchasing a new electric vehicle, now known as the Clean Vehicle Credit. Furthermore, as of January 1, 2023, individuals who purchase used electric vehicles may also be eligible for a tax credit, which is capped at the lesser of $4,000 or 30% of the vehicle's sales price, based on their income. These tax credits work as a dollar-for-dollar reduction of the taxes you owe, potentially reducing your tax liability by as much as $7,500.
It's important to note that, as of August 16, 2022, the final assembly of the eligible automobile must take place in North America to qualify for these credits.
There were no stimulus payments issued in 2022, and as a result, there won't be a Recovery Rebate Credit available to claim for stimulus payments that were not received in that year.
Unless the deduction is extended later in the year, the sole method for claiming charitable deductions will be by itemizing on Schedule A.
Age limits for the Earned Income Credit (EIC) have been reinstated to their pre-2021 tax return rules. This means that taxpayers who were 65 or older in 2021 will no longer be eligible for the EIC in 2022, pending any further legislative changes. Additionally, individuals aged 19-24 with earned income will also be excluded from claiming the EIC. The option to use 2019 earned income for calculating the EIC has been eliminated. Furthermore, the investment income limitation for the EIC has been raised from $10,000 to $10,300, with adjustments for inflation in subsequent years after 2022.
For taxpayers with zero qualifying children, the EIC has been expanded in 2022, but the maximum credit amount for this group will be substantially lower, capped at $560 in 2022.
For 2022, the deduction that teachers can claim for expenses paid out of pocket increases to $300.
The $10,200 exclusion for unemployment income was a provision applicable only to the tax year 2020, pending any additional legislative changes. Consequently, the full amount of unemployment benefits received in 2022 will be subject to federal income tax.
The deduction of $300 for cash contributions that was initially set to expire after the 2020 tax returns has now been extended to include the 2022 tax returns. An important change to note is that previously, this deduction was limited to $300 per tax return, but for 2022, it will be limited to $300 per individual taxpayer. This adjustment allows joint tax returns (MFJ) to potentially claim a deduction of up to $600 for cash contributions. Furthermore, the 60% of Adjusted Gross Income (AGI) limitation for charitable contributions has been temporarily suspended for the year 2022.
Commencing in 2022, the majority of student loan debt obtained for higher education that is forgiven will not be treated as taxable income. Additionally, the provision that permits employees to exclude up to $5,250 of college loans paid by their employer in 2020 from their taxable wages has been extended, now covering the years through 2025. It's important to note that this $5,250 limit applies to both benefits related to student loan repayment and other educational assistance provided by an employer.
The gift tax exclusion for 2022 maintains its limit at $15,000 per recipient. This implies that you can provide gifts of up to $15,000 to each individual, or $30,000 if your spouse concurs, which includes children, grandchildren, or anyone else, without the requirement to file a gift tax return or utilize any portion of your lifetime estate and gift tax exemption. Furthermore, the lifetime estate and gift tax exemption has risen to $11.7 million for 2022, reaching $23.4 million for couples when the portability election is promptly exercised.
Commencing in 2022, the Tuition & Fees Deduction has been discontinued. Nevertheless, to mitigate the impact of this deduction's elimination, the phase-out thresholds for the Lifetime Learning credit have been permanently raised. These phase-out thresholds now align with those of the American Opportunity credit.
The suspension of repaying excess premium tax credits applied only to the 2020 tax year, pending further legislative changes. As a result, for the tax year 2022, if you have received an excess of premium tax credits for your health insurance premiums, you will be required to reimburse that amount when filing your 2022 tax return.
Beginning with the 2022 tax year, third-party payment settlement networks such as PayPal and Venmo will issue a Form 1099-K to individuals who receive payments totaling over $600 throughout the year for goods or services, irrespective of the number of transactions. Previously, this form was only provided if you had received more than $20,000 in gross payments and engaged in over 200 transactions. It's essential to note that the gross payment amount does not include any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts, or any other similar adjustments.
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