What’s New for 2022?

Estate and Gift Tax: For 2022 the gift tax annual exclusion increases from $15,000 to $16,000. The gift/estate tax lifetime exemption increases from $11.7 million to $12.06 million. However, in 2025 the lifetime exemption is scheduled to revert back to $5 million with an adjustment for inflation. Illinois 2022 state death tax threshold is $4 million.

Child Tax Credit: Unlike 2021, the child tax credit is not being distributed throughout the year in monthly payments, and it also reverts back to $2,000 per child under 17 for 2022. In 2021, the credit was $3,000 per child under age 18 ($3,600 for each child under age 6). In addition, the credit is no longer fully refundable in 2022, but only up to $1,500 for some lower income families.

Charitable Cash Donations: In 2021, up to $300 for single filers ($600 for married filers) in cash charitable donations could be deducted even if you didn't itemize. This will not be available for 2022. In addition, the 60% adjusted gross income limit on charitable gifts of cash is reinstated.

Mortgage Insurance Premiums: The tax deduction for private mortgage insurance expired at the end of 2021, and many believe it is unlikely Congress will reinstate this deduction before the end of the year.

Teacher Out-of-Pocket Expenses: Qualified educators will be able to deduct up to $300 for out-of-pocket classroom supplies, up from $250 in past years. If joint filers are both teachers, they can deduct up to $600.

Business Meal Deductions: According to the IRS, for 2022, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal. The IRS also states to qualify for the higher limit, the business owner or an employee of the business must be present when food or beverages are provided and that the expense cannot be lavish or extravagant.

2022 Mileage Rates: From January 1, 2022 through June 30, 2022, the standard rate for business driving increased to 58.5 cents per mile, and medical rate and moving expenses for active members of the Armed Forces increased to 18 cents per mile. The charitable rate remained 14 cents per mile.