The 2022 tax filing season is approaching fast. Many Americans are anxiously looking forward to it as they collect their tax refund.
Roughly 75% of all Americans receive a tax refund from the Internal Revenue Service (IRS). The average refund is more than $3,200 per tax filer.
Each year, the tax code changes and there are new considerations for filers. Read on for an in-depth tax filing 2022 guide. Explore topics such as handling your IRA contributions and lowering your income tax liability.
401(k) and IRA Contribution Limits
The good news for tax filers is that the 401(k) and IRA contribution limits have increased. For 2022 income taxes, the 401(k)-limit increased by $2,000.
The limit is now set at $22,500 for individual contributions to most retirement savings plans. This limit covers Thrift Savings Plans (TSP), 403(b), and 457 accounts.
The IRA limit increased to $6,500 in 2022, which is $500 higher than the prior year. You can also do $1,000 in catch-up contributions when you are 50 years or older.
The standard deduction is also increasing for those filing taxes. For single filers and married couples filing separately, the standard deduction for 2022 is $12,950.
For a head of household, the standard deduction is $19,400. Surviving spouses and married couples filing jointly have the highest standard deduction at $25,900.
Inflation is having a significant impact on the standard deduction thresholds. In 2023, the figures are all expected to rise substantially.
Tax brackets are another area that is impacted by inflation. Due to rising wages and the cost of goods, tax brackets are increasing accordingly.
The marginal tax rates vary from 10% to 37% based on your income. It all depends on your filing status, whether you are single or a head of household.
For example, a married couple filing jointly earns $175,000. They are going to pay a marginal tax rate of 22%.
It is important to note that tax rates are progressive. For this couple, they will pay 10% on their first $20,550 earned. From $20,550 to $83,550, the rate increases to 12%. The remainder of their income up to $175,000 is taxed at the 22% rate.
For many filing their taxes, this can get confusing. Click for more information on tax services that can help you calculate your liability this year.
Child Tax Credit
The 2021 tax season included major changes to the Child Tax Credit (CTC). This included monthly payments to infuse capital into the American economy.
For the 2022 tax season, the CTC is returning back to normal. Monthly advance payments are no longer occurring, and the CTC is back to $2,000 per child.
Your Tax Filing 2022 Guide
You are now ready to start preparing for the 2022 tax filing season. You will start to receive your income documentation like W-2 forms in late January or early February.
Make sure to take new tax brackets and standard deduction thresholds into account. Other factors like the CTC also have a major impact. If you enjoyed this article about the tax filing 2022 guide, check out our blog for more great content.