- The IRS will begin accepting returns for 2022 on Monday, but there are some changes taxpayers should be aware of.
- The standard deduction has been raised to account for inflation. Single filers can deduct almost $2,000 more than the previous year, and joint filers can deduct almost $1,000 more.
The IRS has begun accepting tax returns for the 2022 tax year on January 17th, but there are some changes that taxpayers should be aware of before filing. The IRS has raised the standard deduction to account for inflation. Single filers can deduct almost $2,000 more than the previous year, and joint filers will be able to deduct almost $1,000 more. These increased standard deductions are going to be affecting taxpayers and they adjust your taxes the tax brackets every year. The tax brackets increase every year to account for inflation, this is known as “bracket creep” which is when you make more and then you find yourself in higher brackets.
Toby Mathis, Esq., a founding partner at Anderson Business Advisors, and manager at the Las Vegas office explains that one-way taxpayers can take advantage of these increased deductions is by funding a health savings account (HSA). An HSA is a triple threat, as not only do you get a deduction for making that contribution, but if you use it for health expenses you don’t pay tax even on the growth. Unlike an IRA, where if you put money in an IRA and you pay tax when you take it out, with an HSA that’s not the case as long as you’re using it for medical expenses you can still pay zero tax on it.
Toby also explains that the law has changed and now there is no penalty if you don’t use the funds in the HSA, so if you’re older and you’re just not going to be able to use all that money on your health then there’s you could just pay the tax on the way out. This is a big change from previous years where if you didn’t use the funds in your HSA for medical expenses, you would be penalized and taxed.
In conclusion, the IRS has raised the standard deductions for the 2022 tax year to account for inflation. Taxpayers can take advantage of these increased deductions by funding a health savings account (HSA), as it not only gives a deduction for making the contribution, but also allows for tax-free growth on the funds as long as it is used for medical expenses. The laws have also changed, and now there is no penalty if you don’t use the funds in the HSA, so it’s worth considering it as an option. It’s always good to consult with a tax expert to ensure you are taking advantage of all the tax benefits available to you.
Our team at Anderson Advisors is ready to help you navigate these changes and prepare for tax return season. We’ll work with you to create a customized strategy that meets your unique asset filing needs. Contact us today!
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