2022 Federal Tax Legislation
Recent Tax Law Update Reminders
Premium Tax Credit
The American Rescue Plan (ARP) significantly enhanced the availability of the Affordable Care Act’s (ACA) Premium Tax Credit (PTC) to make healthcare acquired on the ACA’s Health Insurance Marketplace more affordable for 2020, 2021, and 2022. The ACA created the refundable PTC for those taxpayers purchasing insurance on the ACA Marketplace with household income between 100% and 400% of the Federal poverty level. For tax years beginning in 2021 and 2022, the applicable percentages of household income have been lowered for all income levels, and taxpayers with income of 400% of the FPL or higher are eligible for the PTC (if they otherwise qualify).
Health Insurance Premium Assistance
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Another temporary provision in the American Rescue Plan (ARP) that applies only to the 2021 and 2022 taxable years increases the subsidies for eligible taxpayers with coverage purchased on the Affordable Care Act (ACA) marketplaces by making the insurance indexing adjustments inapplicable to the 2021 and 2022 tax years, as well as reducing the applicable premium percentages that are considered when calculating the premium assistance amount. Also, for 2021 and 2022, the Act further expands the number of taxpayers eligible for assistance by allowing households with taxable income over 400% of the poverty line to claim assistance.
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Student Loan Debt
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The American Rescue Plan (ARP) adds a temporary exception to the general rule for student loans. From 2021 to 2025, forgiven student loan debt is not subject to Federal income tax. The provision applies to student loans provided by the Federal government, state governments, and eligible educational institutions, as well as certain private education loans as defined in the Truth in Lending Act.
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Tax Rate Schedules for 2022
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One of the keys to the Tax Cuts and Jobs Act is a reduction in individual tax rates. While the current number of tax brackets has been retained, each one has been reduced. There are seven tax rates for individual taxpayers. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The tax rate of 37% applies to joint filers with taxable income over $647,850 (single filers over $539,900).
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Standard Deduction
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In 2022, the standard deduction amounts increased to $12,950 for individuals, to $19,400 for heads of household, and to $25,900 for married couples filing jointly and surviving spouses.
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Standard Mileage Rates
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The following are the optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes during 2022. As of January 1, 2022, the standard mileage rates for the use of a car, van, pickup or panel truck are:
➢ 58.5 cents per mile driven for business use between January 1 and June 30; and 62.5 cents per mile driven for business use between July 1 and December 31.
➢ 18 cents per mile driven for medical or moving purposes between January 1 and June 30; and 22 cents per mile driven for medical or moving purposes between July 1 and December 31.
➢ 14 cents per mile driven in service of charitable organizations (currently set by statute).
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