The IRS issued Revenue Procedure 2021-45, setting out inflation adjustments for the 2022 tax year. Although this Rev. Proc. has been issued, Wolf & Company continues to monitor the status of the Build Back Better Act (H.R. 5376) which could change the information summarized below. Before executing any tax planning in 2022, please consult your Wolf engagement team directly.
The important highlights of Rev. Proc. 2021-45 are summarized below:
Gift & Estate Tax:
The gift tax annual exclusion will increase for the first time in several years to $16,000 per year per donee for tax year 2022.
The lifetime gift and estate tax exemption will increase to $12,060,000 and the GST exemption will also be adjusted to $12,060,000 in 2022.
The annual amount that can be gifted to a non-US citizen spouse in 2022 is set at $164,000. All gifts to U.S. spouses will continue to qualify for the unlimited marital deduction.
Income Tax:
Marginal Rates, Capital Gains Rates and Alternative Minimum Tax:
For tax year 2022, the top tax rate remains 37% – a breakdown by rate bracket is below:
| Tax Rate | Single | Married Filing Jointly | Head of Household |
| 10% | Up to $10,725
|
Up to $20,550 | Up to $14,650 |
| 12% | $10,276-$41,775
|
$20,551-$83,550 | $14,651-$55,900 |
| 22% | $41,776-$89,075
|
$83,551-$178,150 | $55,901-$89,050 |
| 24% | $89,076-$170,050
|
$178,151-$340,100 | $89,051-$170,050 |
| 32% | $170,051-$215,950
|
$340,101-$431,900 | $170,051-$215,950 |
| 35% | $215,951-$539,900
|
$431,901-$647,850 | $215,951-$539,000 |
| 37% | Over $539,900
|
Over $647,850 | Over $539,000 |
The income thresholds for long-term capital gains rates have been adjusted as follows:
| Tax Rate | Single | Married Filing Jointly | Head of Household |
| 0% | Up to $41,675
|
Up to $83,350 | Up to $55,800 |
| 15% | $41,676-$459,750
|
$83,351-$517,200 | $55,801-$488,500 |
| 20% | Over $459,750
|
Over $517,200 | Over $488,500 |
The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 for single filers and $1,079,800 for married filing joint filers.
Standard Deduction and Personal Exemptions:
The standard deduction has been increased as follows:
| Filing Status | 2022 |
| Single | $12,950 |
| Married Filing Joint | $25,900 |
| Head of Household | $19,400 |
The personal exemption for tax year 2022 continues to remain at $0, as this was eliminated as part of the Tax Cuts and Jobs Act.
IRAs and ROTH IRAs:
The limit on annual contributions to an IRA remains unchanged at $6,000 in 2022.
The IRA catch-up contribution limit for individuals aged 50 and over and remains at $1,000 as it is not subject to an annual cost of living adjustment.
The income limits for ROTH IRA contributions have been adjusted as follows:
| Filing Status | 2022 |
| Single | $129,000 (phase out beings) to $144,000 |
| Married Filing Jointly | $204,000 (phase out begins) to $214,000 |
| Head of Household | $245,000 |
Other Changes of Note:
- Qualified Business Income thresholds have been adjusted as follows:
| Filing Status | 2022 |
| Married Filing Jointly | $340,100 |
| Single + All Other Returns | $170,050 |
- The Foreign Earned Income Exclusion is $112,000 which is an increase from $108,700 from tax year 2021.
- The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income more than $80,000 for single returns or $160,000 for married filing joint return.
- Interest on education loans begins to phase out in 2022 when modified AGI exceeds $70,000 for single returns and $145,000 for married filing joint returns and is completely phased out when modified AGI exceeds $85,000 for single returns and $175,000 for married filing joint returns. The maximum deduction is capped at $2,500.
- The maximum credit allowed for adoptions in 2022 is up to $14,890 in 2022.
- For covered expatriates, the statutory exclusion amount has been increased to $767,000 in 2022.
