Tax Tips for Everyone: February 2022

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Tax Tips for Everyone is created to provide updates on current tax topics and increase   understanding of terms and issues on income and other taxes.

Child Tax Credit

The child tax credit for 2021 was increased from $2000 to $3000 ($3600 for a child under age 6). A portion of the credit was paid in advance as monthly payments from July through December 2021. The individuals and families who received the advance child tax credits from July through December will have to reconcile it on their 2021 income tax return.   Unless one opted out they should have received either $250 or $300 per month for each child ($1500 or $1800 total) during 2021. This amount is equal to one-half of the $3000 or $3600 (for a child under age 6) child tax credit which is allowed on their 2021 tax return.

The IRS has been sending out Letter 6419 to everyone who received the advance child tax credit payments.  The amount shown on the Letter 6419 needs to be compared to the amount actually received by check or by direct deposit to verify accuracy. The IRS has already acknowledged errors in some of the letters.  To double check the amount the IRS thinks was paid, one can also establish an online IRS account to verify the amount listed there.  It is possible for the it to be different from the amount in the letter 6419. Be sure to take all Letter 6419s received to your tax preparer. In some cases, each spouse may receive a separate Letter 6419.

Hopefully, the amount in Letter 6419 is correct. To file your taxes a Schedule 8812 is completed to calculate the amount of tax credit still due to you or in rare cases the amount owed back to the IRS. Schedule 8812 also allows one to claim the credit for a child born during 2021. Unless additional legislation is passed the Child Tax credit for 2022 returns to $2000 per child.

Charitable Donation Deduction

In the past few years, unless one could itemize deductions there was generally no deduction for donations to charities. On a 2021 tax return a charitable donation deduction is allowed for cash donations up to $300 per single return or $600 for a married filing joint return. This is allowed for those filing using the standard deduction. Add up all cash donations to any 501(C) type charities or church and take advantage of this tax break.  This deduction also expired at the end of 2021 and will not be available for 2022 without further legislation.

Lower RMDs Required

For 2022 due to changes in the longevity tables used to calculate the Required Minimum Distribution payments from IRAs and 401Ks those age 72 and older will be required a smaller amount be paid from their retirement accounts.

Due Date

The deadline for filing a 2021 tax return is April 18, 2022 unless you live in one of the areas impacted by a natural disaster. Check with your tax preparer or the IRS for any extension in your area.

Standard Deduction for 2021 & 2022

Filing Status2021 Tax Year2022 Tax Year
Single or Married filing separately$12,550$12,950
Married, filing jointly$25,100$25,900
Head of household$18,800$19,400

Federal Income Tax Brackets for 2021 & 2022

Tax due is calculated on taxable income (after all deductions) not gross income.

Income Tax Brackets and Rates in 2021 (for taxes due April 18, 2022)

RATETaxable Income (Single)Taxable Income (Joint)
10%$0 to $9,950$0 to $19,900
12%$9,951 to $40, 525$19,901 to $81,050
22%$40,525 to $86,375$81,051 to $172,750
24%$86,375 to $164,925$172,751 to $329,850

Additional rates for 32%, 35% and 37% not listed

Income Tax Brackets and Rates in 2022 (for taxes due April 15, 2023)

RATETaxable Income (Single)Taxable Income (Joint)
10%$0 to $10,275$0 to $20,550
12%$10,276 to $41,775$20,551 to $83,550
22%$41,776 to $89,075$83,551 to $178,150
24%$89,076 to $170,050$178,151 to $340,100

Additional rates for 32%, 35% and 37% not listed