(773) 930-3788 intisar@featchicago.com

Dear Taxpayers:
As always, I am committed to keep you up-to-date with helpful information and would like to share with you a few highlights of the most significant tax law changes and latest updates with key rates, thresholds and limitations for TY 2022 that you need to be aware of.

  • Due Date – File your 2022 income tax returns by April 18, 2023 to avoid interest and penalty on taxes not paid for late filing.
  • Standard Deduction – $12,950 for single or married filing separately; $25,900 for married filing jointly or qualifying surviving spouse; $19,400 for head of household. If blind or over age 65, deduct additional $1,750 for single/ HHH and $1,400 for MFJ/ MFS/ QSS. If the standard deduction is higher than the itemized, use the standard deductions.
  • Health Saving Account (HSA) – $3,650 maximum contribution for self only coverage and $7,300 for family coverage.
  • Student Loan Interest – $2,500 maximum interest deductions. This amount phaseout for married filing joint returns if modified adjusted gross income is $145,000 – $175,000 and for single/HHH MAGI $70,000 – $85,000.
  • Health Coverage Tax Credit – This credit is not available for 2022. It was not extended after Tax Year 2021.
  • 401(K) Contributions – $20,500 deferral and $27,000 for catchup deferral contributions. This is a good opportunity to shelter a good portion of your earnings from being taxable. Contact your employer’s HR Department to sort your options immediately, if needed.
  • Student Loan Forgiveness – This debt is not taxable for federal income tax purpose. Based on the one time debt relief announced by the Board of Education, the relief is up to $20,000 in debt cancellation to eligible Pell Grant recipients and up to $10,000 in debt cancellation to eligible non—Pell Grant recipients.
  • Educator Expense Increased – Educators may deduct up to $300 of qualified expense paid books or school supplies purchased.
  • Earned Income Credit – To claim the earned income credit without a qualifying child, you must be at least age 25 but under age 65. If married filing joint return, either spouse can meet the age requirement, as long as one of the spouses does.
  • Child Tax Credit and Additional Child Tax Credit – The initial amount for a child tax credit is $2,000 for each qualifying child. The maximum refundable is $1,500 for each qualifying child; $500 nonrefundable credit for other dependent.
  • Child and Dependent Care Expenses Credit – The refundable credit was available for tax year 2021 is not extended to 2022. The credit for child and dependents care expense is nonrefundable. The credit is up to $3,000 for one qualifying person and up to $6,000 for two or more qualifying persons. The maximum credit is amount is 35% of employment-related expenses.
  • Education Credit – American Opportunity credit up to $2,500 is available for four years for eligible students. Lifetime Learning up to $2,000 per return available for unlimited number of years.
  • Foreign-Source Income – In addition to reporting foreign earned income, you must also report unearned income. This may include interest, dividends, and pensions from sources outside of the United States unless exempt by law or tax treaty. If you were a beneficiary of a retirement plan, you may have to report the undistributed income on the plan. Report a distribution received from a foreign account or trust and report your foreign financial assets, if any.
  • Digital Assets Virtual Currency – The only evidence of its existence is the digital records or ledges indicating balances held and transactions that have occurred. The IRS uses the term “virtual currency” to describe the various type of convertible virtual currency that are used as a medium of exchange, such as a digital currency and cryptocurrency. Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal Income Tax purposes. If a taxpayer disposed of any virtual currency that was held as a capital asset, Form 8949 must be used to figure the capital gain or loss and report it on Schedule D (Form 1040). If virtual currency was received as compensation for services or disposed of any virtual currency that was held for sale in a trade or business, such transaction must be reported as income same as reporting other income. Keep accurate records to avoid being challenged by the IRS.
  • Self- Employment Tax – 15.3% (12.4% for SS plus 2.9% for Medicare); 0.9% Medicare Surtax on self-employment income in excess of $200,000 (single); $250,000 (MFJ); or $125,000 (MFS).

Identity Theft continues to be a priority. Your tax professional should have implemented security measures in the use of tax software and a safe method in the exchange of documents. I am aware and fully prepared for this tax filing season. My investment in our Client Portal Service is ready and available to give each client the ability to securely log in to safely share and exchange documents.