Tax Code Updates 2022: Unlock The Opportunities

It's been a few months since you had to pay taxes. Let's face it, paying taxes stinks. No one likes to think about next year's tax code updates already. You probably haven't thought about next year's taxes yet. 

Let me tell you why you should start planning. Failing to plan is planning to fail is a cliche, but it holds a nugget of wisdom. The truth of the matter is this. If you start planning now for the tax code updates, you'll be able to save more money when tax season rears its ugly head again. 

There were several tax code updates for 2022. Also, inflation has been a bugaboo and political football this past year. Because of the rule changes and inflation, the 2022 tax tweaks are here. It would be best if you prepared for them. 

Our Royal Tax Group Mentoring Session covered 2022's tax code updates with Pete Schindele, CPA.

To help you navigate the murky waters of tax season 2022, we compiled a list of the four most important tax code updates from that session. These changes are most likely to affect you as a real estate investor. Use this list to prepare for the future so you can keep more of your cash next year when it's time to file your taxes. 

#1 Tax Code Updates On Income Brackets

Tax rates didn't change, but tax brackets did. The changes occurred due to inflation from September 2020 to August 2021. See below for the updated tax brackets: 

#2 Standard Deductions Increase For Everyone

The standard deduction amounts increased for 2022. The increase in deduction amounts accounts for inflation. Here are the increases:

• Single: $12,950 up from $12,550; $14,700 if 65 or older 
• Married filing jointly $25,900 up from $25,100; plus up $1,400 for each spouse 65 or older
• Head of household: $19,400 up from $18,800; plus $1,750 if 65 or older

The standard deduction allows you to save money on taxes by reducing your taxable income. You do this by paying your children to work for you up to the standard deduction. 

Here are some general rules that you should follow if you have children who can work for you: 

• Children have to be doing work for you. 
• Pay your children in a way that is commensurate with their age and the tasks they are doing. 
• Although technically, you don't have to file a tax return for less than $12,950 in wages. It's probably a good idea to do so just so that you have proof that you paid your children in case you get audited. 

Read our article Hiring Your Children Has Monumental Benefits: Decrease Taxes, Increase Profits. It gives you an in-depth look at how you can hire your children, claim an expense for your business, and keep your wealth within your family. 

#3 Safeguard Your Health And Money With HSA Contributions

You can reduce your taxable income by contributing to a health savings account. This account helps you pay for medical expenses. 

The deductible contribution increased to $3,650 from $3,600 for a single person. For families, the HSA deductible went to $7,200 from $7,300. 

#4 Tax Code Updates Means More Money For Your Family  

The lifetime estate and gift tax exemption surged from $11.07 to $12.06 million ($24.12 for couples). Also, the annual gift tax exclusion went up to $16,000 from $15,000. 

That means you can give your child $16,000 (or $32,000 for couples) to each child, grandchild, or person without filing taxes on the gift. You won't have to use your estate and gift tax exemption either. 

Key Takeaways

No one wants to think about paying taxes before taxes are due. But, you should plan to keep more money in your pocket and out of Uncle Sam's coffers. To hold onto your cash, you must stay abreast of the tax code updates that may affect you in 2022. 

Some critical updates that may affect you as a real estate investor include the changes to:

• Tax brackets
• Standard deductions
• HSA contributions
• Lifetime estate and gift tax exemption