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Tax Changes and Deductions for 2022

Tax Changes and Deductions for 2022

May 31, 2022

It’s never too early to be prepared for the next tax season. In fact, the idea behind tax planning is to execute tax saving strategies during the year, not just at tax time. I’ve selected four specific strategies from the recent Money Matters newsletter and deepened the description of each for your tax planning pleasure. All of these are important to factor into tax season next year.  

Everyone wants tax deductions
A tax deduction is an amount of money, identified by the IRS, that allows you to reduce your taxable income so you can lower your tax payments. 

Everyone wants deductions, and/or to save money on their taxes. I would never, ever suggest tax evasion, which is of course illegal, but the IRS Tax code does allow for perfectly legal deductions. You should take those deductions for which you qualify. As always, this is general advice and may or may not apply directly to your financial situation, so feel free to call me if you have any questions.

Item #8: Charitable gift deductions
If charitable contributions are important to you, read on. The rules regarding Qualified Charitable IRA Distributions, (QCD’s) didn’t change from last year and this deduction is often forgotten. Here are the details - At 70½  you can gift directly from your IRA to a qualified charity and the amount can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met. For example, the distribution must be one that would otherwise be taxable to you. If you are in a position to do so, you can exclude up to $100,000 of QCDs from your gross income each year. Also, if you file a joint return, your spouse, if also 70½ or older, can exclude an additional $100,000 of QCDs.

Make sure your parents are aware of this too. They can save substantially on the taxes they would pay, leaving more for them or those they care about. 

Other “gift deductions are allowed as well. Speak with me to learn more how about how to address tickets for attending fundraisers or the deductions associated with the amount of your old lease house that you donated to one or more of your children. We can talk about that too. 

Item #20: Health Savings Accounts (HSAs)
These are often misunderstood. The idea is that it’s pre-tax money. When you spend what you’ve socked away in this account on qualified medical expenses, you don’t pay tax on it. But every year you have to spend the whole amount or you’ll lose it.

If you have access to a HSA at work and you’re not using it, pick up the phone now and call me. Very few understand the long-term planning opportunity these accounts provide.

Item #24: For the self-employed 
For owners of pass-through businesses, if you qualify, you can deduct up to 20% of your net business income from your taxes. A pass-through business means you have a sole proprietorship, a partnership, a LLC, a LLP or an S corp.

Note that the limitation on claiming the 20% qualified business deduction is going up. That's great, but make sure you stay below the limit to avoid a quantum leap in your tax liability. 

Key Takeaways

  1. Charitable contributions and donations are deductible on your federal income tax return, lowering your overall taxable income. It would benefit you and your parents to have a plan for those contributions and donations.
  2. You could deduct long-term care insurance premiums, and you definitely can if you own a business.
  3. Very few understand the long-term planning opportunity HSAs provide.
  4. Self-employed? Make sure you stay below the income limit to avoid being hit with a larger tax bill than necessary.

I’m always up for a quick conversation on any of this. Feel free to contact me at any time.

At Aha! Financial, clients receive a personal, customized plan for managing their finances and preparing for a secure future. Don Gottfried, CEO and Founder, considers his clients’ real-life circumstances and creates a strategy that allows them to care for their businesses, themselves, and those they love.

Don Gottfried, CFP®, CLU®, CLTC

Material discussed is meant for general informational purposes only and is not to be construed as a recommendation or advice. Please note that individual situations can vary therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.