2022 Year-End Tax Planning for Individuals


With rising interest rates, inflation and continuing market volatility, tax planning is as essential as ever for taxpayers looking to manage cash flow while paying the least amount of taxes possible over time. As we approach year end, now is the time for individuals, business owners and family offices to review their 2022 and 2023 tax situations and identify opportunities for reducing, deferring or accelerating their tax obligations.

Individual Tax Planning Highlights

2022 Federal Income Tax Rate Brackets
2023 Federal Income Tax Rate Brackets

2022 Long-Term Capital Gains Rate Brackets

Standard Deduction                                                                                      Retirement Plan Contributions

 

 

 

 

 

 

2022 Changes:

  • Child Tax Credit
    The child tax credit returns to 2,000 per qualifying child.
  • Charitable Contribution
    Cash contributions made to qualifying charitable organizations, including donor advised funds, in 2022 and 2023 will be subject to a 60% AGI limitation. The limitations for cash contributions continue to be 30% of AGI for contributions to non-operating private foundations. $300 charitable deduction ($600 for joint filer) for nonitemizers not extended for 2022.
  • Gift Taxes
    Gift tax annual exclusion increased to $16,000.
  • Long-Term Care Insurance and Services
    Premiums an individual pays on a qualified long-term care insurance policy are deductible as a medical expense: Deduction limited to individual’s age. Shifting investments to municipal bonds or investments that do not pay dividends to reduce taxable income in future years.

Inflation Reduction Act

  • Residential Clean Energy Credit
      • Solar installed in 2022 is now eligible for 30% tax credit from 2022 to 2032.
      • Also includes: solar water heaters, geothermal heat pumps, small residential wind turbines, residential fuel cells, and storage batteries.
  • Energy Efficient Home Improvement Credit
    • Inflation reduction Act extended the credit to 2022 with 2021 parameters.
      • The credit is 10% of the cost of qualifying energy efficiency improvements installed during the year (improvements to heating, cooling, water heating equipment, insulation material or systems, roof, and exterior doors and windows).
      • $500 Lifetime limitation still applies for the rest of 2022.
    • 2023 and beyond
        • Credit is expected to expire after 2032
        • Credit increases to 30% of cost with no lifetime limits but will have an annual tax credit limit of $1,200.
  • Electric Vehicle Tax Credit
    • This credit is still worth up to 7,500 and most Inflation Reduction Act changes won’t go into effect until January 2023. The change that became effective immediately is the “Final Assembly” requirement.
      • Clean Vehicles sold after August 16, 2022 must undergo final assembly in North America to be eligible for credit.
    • The EV Tax Credit has been extended to 2032. The manufacturing cap will be lifted and used cars will be eligible. In order to qualify for the credit between 2023-2032 the vehicle needs to meet new battery requirements, critical mineral requirements, “Final Assembly”, and price caps.

The information contained within this article is based on federal laws and policies in effect as of the publication date. This article discusses tax planning for federal taxes. Applicable state and foreign taxes should also be considered. Taxpayers should consult with a trusted VSH tax advisor when making tax and financial decisions regarding any of these items.

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