With the year winding down, now is the time to consider your 2022 year-end tax planning strategies.
2022 Year-End Tax Planning
This year we’ve seen the end of the pandemic. But the global economy still continues to suffer from supply chain disruptions, high inflation, and shifting labor policies. The Inflation Reduction Act of 2022 aims to ease these disruptions. Primarily paid for with a 15 percent corporate minimum tax and budget increases for the IRS, new legislation creates tax planning opportunities.
The experienced IRS tax attorney at Columbus, Ohio based Porter Law Office, LLC helps individuals and businesses across the U.S. resolve IRS tax controversies. If you have any questions about your 2022 year-end tax planning, contact our office today.
Minimizing Individual Taxes
A fundamental goal of anyone’s tax planning strategy is to minimize taxes. This is generally done in one of two ways: reducing the amount of income received or increasing deductions.
The impact of inflation makes deferral of income a good choice. The reason is simple. Tax brackets are inflation adjusted by IRS in 2023 by a whopping 8%. If your earnings have not kept up with that level of inflation, deferral of income to 2023 should mean that more of your income falls into a lower tax bracket.
For maximizing deductions, inflation is a major consideration. For 2022, the inflation-adjusted standard deduction amounts are $25,900 for joint filers, $19,400 for heads of household, and $12,950 for all others. Standard deduction amounts are incredibly high, but the state and local tax deduction is still capped at $10,000. That means it is difficult for any individual to claim enough deductions to make itemizing beneficial.
As a result, you may want to engage in a bunching strategy. Bunching essentially involves paying two years’ worth of deductions in a single tax year. So you could accumulate charitable contributions or even medical expenses from two or more years into one year. Even with bunching, inflation adjustments may not get you out of the standard deduction.
Other year-end tax planning strategies are typical of any tax year regardless of the impact of inflation. These strategies include increasing deductions by maximizing education credits, increasing 401(k) contributions, IRA contributions and teacher deductions.
Business Tax Planning Strategies
Business Tax Planning
The corporate AMT is back. The Inflation Adjustment Act of 2022 raised the AMT like a phoenix from the ashes of the TCJA. Beginning in 2023, the new corporate AMT is 15 percent of a corporation’s “adjusted financial statement income” reduced by corporate AMT foreign tax credit. The tax applies to large corporations with average financial statement income in excess of $1 billion. As a result, these corporations may want to accelerate profitability on their financial statements into 2022.
A business should also consider taking advantage of the 100 percent Section 179 expensing deduction for purchases of equipment and machinery. You may want to hold off on these deductions to 2023 as the limitations have been increased by a sizable amount (from $2,700,000 investment limit in 2022 to $2,890,000 in 2023 and $1,080,000 dollar limit in 2022 to $1,116,000 in 2023). The Inflation Reduction Act of 2022 also provides a $7,500 credit for the purchase of clean commercial vehicles after 2022.
Contact an Experienced Columbus, Ohio Tax Attorney
IRS Debt Settlement Tax Lawyer | Gahanna, Ohio
If you have 2022 year-end tax planning questions, contact the experienced Columbus, Ohio tax lawyer at Porter Law Office, LLC today. Our firm handles complex IRS tax controversies. Contact the experienced Columbus, Ohio tax attorney at Porter Law Office, LLC today for a consultation to discuss your particular IRS tax needs and options.