Here’s What’s Changed For The 2022 Tax Season

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It’s about that time of year when you start digging up old receipts and re-learning how to use Excel. Yup, it’s tax season. Nobody likes any surprises when it comes to tax returns or tax refunds. But, you might get some this year. The historical inflation of 2022 triggered some changes to exemptions, deductions and limitations in a number of categories.

Money just isn’t worth what it was in 2021, and the government is recognizing that through some important adjustments. Here’s a quick look at the major changes you can expect when filing for the 2022 tax season.

The Tax Brackets Have Shifted

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For the 2022 tax year, the tax brackets have shifted slightly. The actual percentages to be paid are not changing, however, the qualifying income for each has. You can see a full breakdown of the new qualifying incomes for each tax bracket at IRS.gov. Increases range from several hundred dollars on the lower end, up to just over $16,000 for the highest bracket.

This is good news for individuals who didn’t see a substantial pay increase in 2022. You could find yourself in a lower tax bracket, due to inflation, or at least not in a higher one.

Standard Deduction Increases

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Here’s another inflation-friendly change: standard deductions have changed across the board.

For married couples filing jointly, the standard deduction has increased by $900, and is now up to $25,900.

For single individuals or married individuals filing separately, the standard deduction has increased by $400 and is now up to $12,950.

The head of household standard deduction has increased by $600 and is now up to $19,400.

The Wealthy Can Deduct A Little More

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The alternative minimum tax (AMT) exemption has increased slightly. For those unfamiliar with the AMT, it’s a system in place that prevents the ultra-wealthy from escaping paying their fair share of taxes. You can learn more about the broader implications of the AMT on Investopedia. But put simply, it puts certain caps on how much the ultra-wealthy can deduct from their taxes. The IRS is lightening up on this slightly for 2022.

The alternative minimum tax (AMT) exemption has increased slightly, from $73,600 to $75,900 for individuals, $59,050 for married couples filing separately and $118,100 for married couples filing jointly.

A Small Break On Commuting Expenses

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If you previously took advantage of qualifying transformation and parking fringe benefits, you can use a bit more for 2022. Transformation fringe benefits allow employees or employers to use pre-tax dollars to pay for qualifying expenses to cover commuting to or parking at work. More specifically, it allows employers or employees to have pre-tax dollars withheld from their paychecks to cover these expenses.

The monthly limitation on this benefit for 2021 was $270 and for 2022 it is up to $280. That’s $280 for commuting costs, and parking costs, respectively.

A Change In Personal Health Savings Accounts

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Taxpayers who pay for some or all of their own healthcare will notice some changes for the 2022 year. For starters, the limitation for the employee salary reduction for contributions to a flex health savings account has increased from $2,750 to $2,850.

Minimum deductibles for self-only medical coverage have increased by $50 since 2021, and are now at $2,450 for individuals. Meanwhile, the new maximum deductible for individuals is at $3,700, up $100 from 2022. For families, the new minimum deductible is $4,950 and the new maximum is $7,400.

The out-of-pocket maximum is up as well, now at $4,950 for individuals and $9,050 for families.

Give More Gifts, Tax-Free

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If you were hoping to gift money to a spouse or family member, here’s some good news: the new gift exclusion amount has increased from $15,000 to $16,000.

More Adoption Expenses Covered

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Finally, parents looking to adopt can expect a bit more government assistance. In 2021, up to $14,440 of expenses associated with adoption were deductible. For 2022, that figure has increased to $14,890.