Inflation has reached an all-time high and remains on an apparently steady upward trajectory, with goods and services increasing in price and leaving many to struggle financially. While the economy is bouncing back from 2020 levels, the issue of inflation continues to be a source of deep concern and considerable stress for many Americans. In November, the IRS made significant changes to various tax laws, including over 60 tax provisions and annual inflation adjustments for the 2022 tax year. Philip L. Liberatore, CPA states, “I believe it is imperative for tax professionals to share this new and noteworthy tax information with their clients as the extensive changes made will affect many.”
There are various ways in which these revisions will impact Americans in the new tax year. Firstly, there will be an increase in the tax bracket income ranges; more specifically, income tax percentages will remain in place, and the income limits will change, equating to about a 3% income increase within each tax bracket. Secondly, there will be an expansion in the standard deduction, which means that taxpayers who choose this over itemizing will see even less money taken out as the standardized deduction threshold rises. Financial experts recommend that individuals work with a fiduciary financial planner and a tax professional to ensure they are on top of their tax planning. The specialists reiterate that the higher an individual’s income is, the more valuable utilizing a tax expert can be.
Another change that people will notice in the tax year 2022 is the increase of 401K contributions: those who have a 401K plan as a benefit can now contribute more to their account, which in turn means a greater tax deduction opportunity. The threshold for foreign income will also increase from 2021 for those who earn money internationally, allowing such individuals to boost their income abroad while not paying taxes on it up to a certain amount. Additionally, the Earned Income Tax Credit (EITC), a refundable tax credit for low- and moderate-income workers, has increased for both single and joint filers, as well as for those with children. This also includes the Child Tax Credit, which is worth a maximum of $3,600 per qualifying child under six and $3,000 per qualifying child under 17.
Overall, these changes will benefit millions of households across America and provide relief to many during this season of inflation. Additional details are available on the IRS’ informational page.
Philip Liberatore, an experienced entrepreneur and CPA, has worked diligently for more than 30 years to provide individuals and corporations throughout Southern California with professional and individualized accounting services. The company he founded, Philip L. Liberatore, CPA, operates out of La Miranda, California and is dedicated to ensuring that clients receive exceptional financial guidance and optimal outcomes. The team led by Philip Liberatore is firmly focused on upholding the highest ethical and professional standards while providing exemplary care to clients.
Philip L. Liberatore, CPA Explains the Advanced Child Tax Credit (CTC) Payments in 2021: https://www.yahoo.com/now/philip-l-liberatore-cpa-explains-173000580.html
Philip L. Liberatore, CPA Explains the Bill that Would Allow IRS to Look into Bank Transactions: https://www.yahoo.com/now/philip-l-liberatore-cpa-explains-113000507.html