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Looking Ahead to 2021 in 2022

 

As 2022 approaches (the 2021 tax year), we’re breaking down this year’s coming annual inflation adjustments and more than 60 tax provisions as detailed in Revenue Procedure 2020-45. In addition to this IRS released The Consolidated Appropriation Act for 2020 which increased the amount of the minimum additional tax for failure to file a return within 60 days of the filing due date. The amounts for this penalty will be either $435 or 100% of the amount due, whichever is less.

Top Changes Made

Standard Deduction Increase
The standard deduction has been increased for all filing types this coming tax year with:
  • Married couples filing jointly at $25,100 – a $300 increase from last year;
  • Single Taxpayers & married individuals filing separately rose to $12,550 – a $150 increase from last year;
  • And head of households rose to $18,800 for 2021 – another $150 increase from last year
Marginal Rate
For this upcoming tax year, the tax rates will remain the same at 37%, 35%, 32%, 24%, 22%, 12% & 10%, however, the dollar amounts to be included within these have increased as follows:
Tax Rate Filing Status Taxable Income Bracket
10%
  • Single = $0 to $9,950
  • Married Filing Jointly = $0 to $19,900
  • Head of Household = $0 to $14,200
  • Married Filing Separately = $0 to $9,950
12%
  • Single = $9,951 to $40,525
  • Married Filing Jointly = $19,901 to $81,050
  • Head of Household = $14,201 to $54,200
  • Married Filing Separately = $9,951 to $40,525
22%
  • Single = $40,526 to $86,375
  • Married Filing Jointly = $81,051 to $172,750
  • Head of Household = $54,201 to $86,350
  • Married Filing Separately = $40,526 to $86,375
24%
  • Single = $86,376 to $164,925
  • Married Filing Jointly = $172,751 to $329,850
  • Head of Household = $86,351 to $164,900
  • Married Filing Separately = $86,376 to $164,925
32%
  • Single = $164,926 to $209,425
  • Married Filing Jointly = $329,851 to $418,850
  • Head of Household = $164,901 to $209,400
  • Married Filing Separately = $164,926 to $209,425
35%
  • Single = $209,426 to $523,600
  • Married Filing Jointly = $418,851 to $628,300
  • Head of Household = $209,401 to $523,600
  • Married Filing Separately = $209,426 to $314,150
37%
  • Single = $523,601 or more
  • Married Filing Jointly = $628,301 or more
  • Head of Household = $523,601 or more
  • Married Filing Separately = $314,151 or more
Alternative Minimum Tax

For this upcoming year, the Alternative Minimum Tax amount is $73,600 and begins to phase-out at $523,600 for single filers ($114,600 with a phase-out beginning at $1,047,200for married couples filing jointly). This is an increase from 2020 which had the exemption amount begin at $72,900 with a phase-out at $518,400 ($113,400 with a phase-out at $1,036,800 for married couples filing jointly).

Earned Income Tax Credit

For this upcoming tax year, the maximum Earned Income Credit amount is $6,728 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,600 in the tax year 2020. The revenue procedure contains a table providing the maximum Earned Income Credit amount for other categories, income thresholds, and phase-outs.

How will this affect me this coming year? For a better understanding feel free to give us a call at 516-541-6549.

 
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