Hi Taylor: I promised myself I wouldn’t leave tax filing until the last minute, so here I am looking for tips at the end of 2021 instead of the middle of 2022. Whatcha got for me? - Dylan
Hey Dylan: I could riff on taxes until all of our heads fell off (just ask my family), so I’ll try to hit the major points of interest for filing in 2022. Above all, keeping track of your spending and receipts is the most important thing, which needed to start ten months ago. As long as you’re squared away there, the following info should be useful.
The standard deduction went up. That said, it only went up a little, by $150 for a single-filer. If you’re one of those people who is always wondering about itemized deduction versus standard, just think about it this way: if you think you can list off deductions that total more than $12,550, pile up those receipts and grab a calculator. If you assume you don’t have that much in business or deductible expenses, then you may go with the standard deduction. Remember that the deduction and tax credits are different things. Don’t overlook the special circumstances that pertain to you (renter’s credit, military personnel, child tax credits, etc.), as those can save you a lot of money on your return.
Child tax credits. People within a certain income threshold started seeing free money show up in July, and the response was a mixture of excitement and fear. On the one hand, who doesn’t want to wake up and see more money in their bank account? On the other, a lot of us believe there’s no such thing as free money. This child tax credit is actually money you were already receiving, but the amount was raised and then distributed incrementally. What that means is you can expect less money back at tax time because you already got it. Most people should see this credit in a positive light; however, if you made a lot more money in 2021 than you did in 2020, you might feel a little strained at filing time should you jump into an income bracket that doesn’t get the same credit.
Coronavirus, business deductions, and more. You can still expect to answer a lot of COVID-related questions when you file. If you work from home full-time, you can write off your office space; if you worked remotely because of the pandemic but aren’t self-employed, that’s not a viable write-off. Long story short, there are a lot of small changes in this year’s tax laws, and it might be a good time to pay a little extra to get the help from a professional if you find it all too confusing. I recommend doing that once every few years anyway as an education and to see if you’ve been missing important stuff filing your own taxes online.
Good work starting early. I hope your new year is filled with blessings—for both your family, and your business!
Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
