Prepare for the New 2022 Tax Plan
If you are in a higher income bracket, have been taking advantage of qualified business income deductions, or investing in real estate, it is important to stay informed about the 2022 tax plan and it’s possible impact on your bottom line.
In May, the Biden administration submitted its Fiscal Year 2022 Budget to Congress and what is known as the “Green Book” – the U.S. Treasury’s evaluation of Biden’s tax proposals. While the complete details of these proposals still require drafting legislative language by the congressional tax-writing committees, here are some of the new proposals and when they would become effective.
First, we know that the proposal is to increase the top marginal individual income tax rate to 39.6 percent. In taxable year 2022, the top marginal tax rate would apply to taxable income over $509,300 for married individuals filing a joint return, $452,700 for unmarried individuals (other than surviving spouses), $481,000 for head of household filers, and $254,650 for married individuals filing a separate return. After 2022, the thresholds would be indexed for inflation using the C-CPI-U, which is used for all current tax rate thresholds for the individual income tax.
What is the timeframe?
It was initially expected that tax legislation would happen before August. However, it is more probable that there will be one larger, collective tax bill passed under budget reconciliation and enacted sometime in October 2021.
How will capital gains be impacted?
How will qualifying business income be impacted?
The Biden administration has also proposed several other tax changes, including:
- The elimination of tax loopholes, including subjecting certain income of pass-through entities to employment taxes and taxing carried interests at ordinary income tax rates all subject to certain thresholds.
Energy-related provisions, primarily in the American Jobs Plan, including details about the repeal of the tax breaks related to fossil fuels and proposed clean energy provisions.
Changes in international corporate taxation in the Made in America Tax Plan, including additional details on these international tax proposals in the Green Book.
Support for housing and infrastructure through provisions related to housing and bonds for infrastructure improvements under the American Jobs Plan.
Increased funding for the IRS, adding additional third-party reporting, and regulate tax return preparers to improve compliance, which is designed to raise revenue by helping to reduce the tax gap — the amount of uncollected revenue due to the government.
This new proposal aims to raise $1.5 trillion over a decade via higher taxes for the top 1 percent, with plans to expand education, childcare, paid leave, and other reforms. While adjusting to tax changes is never easy, Taxperts is here to help. Our team can prepare federal and state tax returns in every state and help you reduce your tax liability with thoughtful planning for now, and the future. Our job is to keep up with the various changes in federal and state tax laws, so you don’t have to. Check out our website, Facebook page, or LinkedIn page for the latest updates.