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SmartAsset: A Guide to Tax Breaks on Your 2022 Return

Taxpayers preparing their federal returns for 2022 will be able to reduce what they owe by taking advantage of some significant credits, deductions and other tax breaks. Here are some of the most popular tax breaks you can potentially use on your 2022 return. A financial advisor can help you optimize a tax strategy for your investment needs and goals.

Popular Deductions

The most popular tax deduction is the standard deduction. It’s available for filers who don’t itemize deductions and, for most filers, taking the standard deduction reduces taxable income more than itemizing would.

Each year, the IRS adjusts the size of the standard deduction for inflation. The exact amount is determined by filing status. For tax year 2022, the standard deduction for single filers and married people filing separately is $12,950, a $400 increase from 2021. Married taxpayers filing jointly can deduct $25,900, up $800 from 2021. Heads of household get a $19,400 standard deduction, an increase of $600.

Another popular deduction for filers who don’t itemize lets them trim up to $300 off taxable income for charitable donations made in cash. Note that for tax year 2021, this cash charitable deduction had been increased to $600 for couples filing jointly. However, it has reverted back to $300 in 2022.

Deductions for Filers Who Itemize

For most taxpayers, taking the standard deduction saves more than itemizing. However, a significant number of taxpayers still itemize. For those filers, mortgage interest, medical expenses and state and local taxes provide some of the best breaks.

If you took out a home loan after Dec. 15, 2017, you can deduct mortgage interest paid during 2022 on up to $750,000 of the loan. A married person filing separately can only deduct interest on the first $375,000 of the loan. If your mortgage dates to before Dec. 15, 2017, the limit is $1 million, or $500,000 for married filing separately.

You may also be able to deduct outlays for medical care, including money spent on doctor visits, prescriptions, x-rays, eyeglasses and other health needs. You can only deduct amounts in excess of 7.5% of your adjusted gross income, however.

State and local tax deductions can be a boon for residents of high-tax states. Filers can deduct up to $10,000 for payments made for property and either income or sales taxes.

Other Tax Breaks for Your 2022 Return

SmartAsset: A Guide to Tax Breaks on Your 2022 Return

Each year the IRS adjusts tax brackets to account for inflation. The marginal rates charged for the seven brackets, ranging from 10% to 37%, are unchanged. But the income levels required to move into a higher bracket increase. This amounts to a break for people whose income would otherwise move them into a higher tax bracket.

For 2022, the lowest 10% rate applies to people earning up to $10,275. Income over that up to $41,775 pays 12%. The next bracket, 22%, applies to income over that up to $89,075. Income over that up to $170,050 pays 24%. After that, a 32% rate is applied to income up to $215,950. From there, income up to $539,900 is taxed at 35%. The highest 37% tax rate applies to income over $539,900.

Taxpayers with children or other dependents under age 17 can likely get the child tax credit. This credit was temporarily expanded up to $3600 in 2021, but it has no reverted back to $2,000 in 2022. The credit reduces your tax bill directly by up to $1,400 per dependent, based on your income.

Other tax breaks include the earned income tax credit, which can be worth up to $6,935 in 2022 depending on filing status, number of children and earned income.

Other tax breaks that were increased during the year to account for inflation include higher income levels for phasing out IRA contributions and higher thresholds for capital gains taxes. The size of an estate that is exempt from federal estate and gift taxes rose from $11.7 million to $12.06 million in 2022.

Bottom Line

SmartAsset: A Guide to Tax Breaks on Your 2022 Return

Tax year 2022 offers an especially rich array of tax breaks mostly thanks to the federal government’s efforts to alleviate the financial burden of a second year of the coronavirus pandemic. From tax-free student loan forgiveness to higher amounts for popular tax breaks like the standard deduction, taxpayers can choose from a wide assortment of ways to reduce the income taxes they owe.

Tax Planning Tips for Beginners

  • To make sure you don’t pay more taxes than necessary, consider hiring a financial advisor who specializes in taxes. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Taxpayers who don’t itemize may still be able to take some deductions using the Schedule 1 form. These include self-employment taxes, contributions to IRAs and health savings accounts, interest on student loans, expenses incurred by teachers and alimony.

Photo credit: ©iStock.com/SrdjanPav, ©iStock.com/mapodile, ©iStock.com/designer491

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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