Inflation Updates for 2022

Inflation Updates for 2022 | Pollock Firm LLC

Every year the Internal Revenue Service publishes a list of inflation adjustments. You can find them on the IRS website in Revenue Procedure 2021-45. Here are the important inflation updates for 2022 that relate to Gift and Estate Taxes and others that are just useful:

Federal Estate & Gift Tax Inflation Updates for 2022

  • 2022 Annual Gift Tax Exclusion will increase to $16,000. This means a person can give any other person at least $16,000 before it is subject to the federal gift tax. Also, a husband and wife may split a $32,000 gift for tax purposes before there is a gift tax. This exclusion is up from $15,000 per person in 2021.
  • 2022 Annual Gift Tax Exclusion for Gifts to Non-Citizen Spouses will be $164,000. This is the maximum amount a person may transfer to a non-citizen spouse before the gift is subject to a gift tax. In order for US law to apply, we will usually be talking about a gift being made to a permanent resident alien spouse. One place where this gets triggered unexpectedly by many is retitling of real estate. Give careful thought to adding a non-citizen spouse to a deed. This exemption is up from $159,000 in 2021.
  • The 2022 Federal Estate Tax Exemption will be $12,060,000. This means that if you die in 2021, the federal government will not tax on the first $12,060,000 that you pass on (unless you have made large gifts in previous years). US Citizens and permanent resident aliens are entitled to the federal estate tax exemption. This exemption is up from $11,700,000 in 2021. However, don’t forget these numbers sunset in 2026.
  • The 2022 Federal Lifetime Gift Tax Exemption will also increase to $12,060,000. This is in addition to the annual gifts that a person can make. Be careful that you do not gift highly appreciated assets!
  • 2022 Reporting Requirements for Large Gifts Received from Foreign Persons: If you receive a gift or an inheritance from a foreign person, you may be required to report it. Recipients of gifts from certain foreign persons are required to report gifts under §6039F if the aggregate value of gifts received in a taxable year exceeds $17,339.

Income Tax Brackets – Inflation Updates for 2022

  • Marginal Rates: For tax year 2022, the marginal tax rates will be:
    • top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647, 850 for married couples filing jointly);
    • 35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
    • 32% for incomes over $170,050 ($340,100 for married couples filing jointly);
    • 24% for incomes over $89,075 ($178,150 for married couples filing jointly);
    • 22% for incomes over $41,775 ($83,550 for married couples filing jointly);
    • 12% for incomes over $10,275 ($20,550 for married couples filing jointly).
    • The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).

Section 199A Qualified Business Income Deduction Inflation Updates for 2022

  • 2022 Section 199A Qualified Business Income Deduction: If you have a pass through business, such as an LLC, S-Corporation, or a partnership, you may be entitled to a 20% deduction. If you are a professional or a consultant, there is usually a cap on how much income you can earn in order to take advantage of this deduction. For 2022, the income limits are:
    • $340,100 for married filing joint returns,
    • $170,050 for married filing separate returns, and
    • $170,050 for all other returns.

Source: IRS Rev.Proc. 2021-45 & IRC Section 2001