Tax Changes You Need to Know About for 2022

Here’s an overview of the 2022 tax changes to help you prepare for what to expect as you file your taxes, featuring Jim Zahansky, AWMA®. 

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Transcript

Welcome to You and Your Money. Empowering you to reach your goals with tips to help you Plan Well, Invest Well, and Live Well. I'm Jim Zahansky, principal, managing partner and chief goal strategist strategist at Weiss, Hale and Zahansky Strategic Wealth Advisors. Now, on to today's topic. (wooshing sound) Today we're going to talk about taxes because tis the season, right? Tis the season, yeah. Here we go. And more specifically, the changes to the tax code that you need to know about when you prepare your taxes for 2022. What are some changes we should know about as we get ready to file our tax returns? It's always a good question and from our perspective, you know, as part of our Plan Well process with clients, you know, we really consider tax efficiency in both investments. And then clearly as people file taxes, this becomes an important topic. Did they get their 1099? Did all these things sort of come in? But the tax code is generally pretty complicated and it's changed quite a bit over the last few years with a lot of COVID changes, etc., a lot of new policy enacted by Congress. And so we encourage people to work with your accountant, start getting your documents together. What we want to talk about today is a mixed bag of good and bad news, so to speak, as it relates to changes in the tax code. All right, let's get the bad news out of the way. What's the bad news? Well first, essentially, the stimulus payments are a thing of the past. So these were occurring during the Pandemic because the government is really stepping in to help out as people were not earning as much. Well, many more people, in fact, were better than full employment here in the US. are working. So a lot of these stimulus payments are gone, which basically they'll be disappointing to know there won't be any more stimulus payments. So the tax refunds for 2020 and 2021 related to the stimulus are no longer there. As well as the child tax credit. So the parents will be disappointed to know that the child tax credit has reverted back to the 2019 levels. And this is also related to pandemic. So basically, for 2022 taxes, the child tax credit is going to be back to the normal rate of $2,000 per child, which your accountant can certainly help you with as you start to file. All right, so COVID related tax breaks are out. That's great on one hand since well, we're coming out of COVID.  Good news. But feeling that progress in your pocketbook or your wallet, not so much. Any not so fun changes for 2022 before we get on to the good news. In addition to the stimulus change, obviously, and this also relates to the Pandemic. One is the above the line charitable deductions are no longer allowed. So in 2021 you could take the charitable deduction up to $300. This is an above the line, which means that it's above sort of the standard deduction no longer available. So in 2022, if you're taking the standard deduction, you're not going to take a charitable deduction above the line. However, of course, if you are charitably inclined and you're donating above the standard deduction, of course you can still itemize, but that above the line deduction for charities gone. Okay, any more bad news before we get the good stuff? The only thing that we should probably talk about is just that those people that have income from goods and services. So if you're one of these folks that's selling things on Ebay or Poshmark, and you're taking some income from it, well, the IRS is requiring reporting on all that taxable income, and it's a slight change for 2022. So you usually get a form 1099K in that scenario. But there was sort of an excessive limit previously. Well, in 2022, essentially, if you sold more than $600 on Ebay or Poshmark, you really start to have to report it, and you should do that using 1099K. So that's a change. Previously it was above a big number, above 20,000. Now they're bringing it down to 600. So if you've been selling things on these sites, just be aware that you have to report the income. Okay, good to know on that, and thanks for that. All right, good news. What can we look forward to with our 2022 tax return? This is probably the only positive thing that inflation has brought us, which is when you think of things like Social Security increases, essentially, inflation means that the government has to increase some of the benefits to you. Well, the standard deduction is increasing for single filers related to inflation by $400. So if you're a single filer, the standard deduction is $12,950. So $12,950. If you're filing as head of household, it's increased by $600. That's going to $19,400. And if you're filing as a married couple jointly, the standard deduction increased in 2022 by $800, or to $25,900. So you know that's a positive. And and obviously, you know, again, if you exceed these amounts, you know you can still itemize, so, you know, that's something to keep in mind as well. All right, so potentially less taxes to pay, whether you take the standard deduction or not. What other positive changes are we looking forward to when we file? Health insurance premium tax credit has remained expanded. So essentially, if you're a person getting your health insurance on the open marketplace, or the health insurance marketplace in Connecticut or elsewhere, essentially you'll still be able to claim that premium tax credit. Just be sure that if you are in fact garnering your health insurance on the open market, you've sort of kept that cost, you're understand what it is. This concept of health insurance premium tax credit. You should be able to get a tax credit for that premium you're paying on the open market. All right? So anything that helps lessen the cost of healthcare always a good thing. And I'm glad to hear that. So, man, oh, man, thanks for covering these points for us today, Jim. That was pretty good stuff right there. I'm sure it's been helpful for a lot of people as we gear up for filing our taxes. It's always a stressful time for people. So organize your 1099, get your W2s, keep them in an envelope. Maybe start to think about an accountant you'd work with or someone. How will you file your taxes locally using a service? Really important to start thinking about getting these items in order so that you can think about tax efficiency. First you want to comply with the rules and the regulations and they become more complex to think through them. I know on our end for our clients, in addition to these conversations, we also make sure that they're getting all of their 1099s related to their investments and hopefully we've put them as we try to in tax efficient funds to limit their tax exposure and increase growth over time. All right. Sounds good, Jim. If you're interested in learning more about how  Weiss, Hale and Zahansky Strategic Wealth Advisors, can help you to Plan Well, Invest Well and Live Well  get in touch with them 860-928-2341. You can learn more and request a complimentary consultation through their website, whzwealth.com. (wooshing sound) That's it for today. As always, thanks for listening to You and Your Money and find even more episodes, videos and other resources at our website, whzwealth.com. Be sure to come back next week for more tips to help you live fearlessly and pursue your financial and life goals. Until then, live well. Weiss, Hale and Zahansky Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network, member FINRA/SIPC. a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret St., Pomfret Center, Connecticut, 06259  and can be reached at 860-928-2341. Weiss, Hale and Zahansky Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strives to support clients in achieving their financial life goals. For more information regarding wealth management and customized financial planning with Weiss, Hale and Zahansky Strategic Wealth Advisors please visit www.whzwealth.com.