Trucking & Taxes – December 2021/January 2022
We get asked this question all the time about what is new or coming in 2022.
With each new administration, they have ideas of how to change the tax code to meet their preferences. The Biden administration is the same and has floated many ideas over the first year of being in office to raise taxes. The Biden administration as of yet has not succeeded in changing the tax code, which means as of writing this the Trump tax code stands.
The coronavirus threw several monkey wrenches into the 2021 tax season, including giving all of the procrastinators an extra month to file.
However, the 2022 tax season will be back to business as usual. Maybe.
Some new things this year include an increase in charitable giving deductions (if you don’t itemize) and the expanded child tax credit (parents, hopefully you noticed some extra cash in your bank account, right?).
We’ll get into both of those changes, and a few more. First, the main details you need to know for the 2022 tax season:
- The big tax deadline for all individual and C corporation federal tax returns and payments is April 15. Partnerships and S corporation federal tax returns Deadline is March 15.
- The standard deduction for 2021 increased to $12,550 for single filers and $25,100 for married couples filing jointly.
- Income tax brackets increased in 2021 to account for inflation.
Tax deductions and credits for 2022
Both help you keep more money in your pocket instead of Uncle Sam’s but in slightly different ways.
Tax deductions help lower the amount of your income that can actually be taxed. Some deductions are only available if you itemize your deductions, while others are still available even if you decide to take the standard deduction.
Tax credits, on the other hand, are dollar amounts actually subtracted from your tax bill, and there are two types: refundable and nonrefundable. If a credit is greater than the amount you owe and it’s a refundable credit, the difference is paid to you as a refund. If it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. Still a win.
Here are some deductions and credits you might be able to claim on your 2021 tax return.
Charitable deductions
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Coronavirus Aid, Relief, and Economic Security Act. The law allows you to deduct up to 100% of your adjusted gross income, which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize your deductions.
What if you’re taking the standard deduction?
Well, nonitemizers may claim an above-the-line deduction (meaning it is not on Schedule A) of up to $300 ($600 for married filing jointly) for charitable contributions made in cash.
Business deductions
If you’re self-employed, there are a bunch of deductions you can claim on your tax return, including travel expenses and the home office deduction if you use a part of your home to conduct business.
But if you’re one of the millions of workers who were sent home to work remotely, you won’t be able to claim the home office deduction since it’s reserved for self-employed people only.
Earned income tax credits
This is a refundable credit designed to help out low- and middle-income households. The maximum adjusted gross income for a single filer with no children is $21,430, while the cap for a married couple with three or more children is $57,414. Depending on your income, your filing status and number of children, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes.
Child tax credit
Got kids? You probably noticed a nice little surprise from the IRS in July: free money! The American Rescue Plan, which was passed in March 2021, bumped the child tax credit from $2,000 to $3,600 for each child under age 6 and to $3,000 for each child 6-17. Rather than waiting until tax time for families to claim this credit, the IRS began sending out a portion of the credit through advance monthly payments ($300 per month for each child under 6 and $250 for each child 6-17). The child tax credit is gradually phased out for people with incomes over $150,000 if married filing jointly or $112,500 if filing as head of household.
The check or direct deposit was nice, but remember that taking advance child tax credit payments now will reduce the amount you get at tax time.
Payments are based on your 2020 taxes, so if your income went up enough in 2021 to start closing in on the phase-out limit for the credit, you might consider opting out of advance payments.
Education credits
The American opportunity tax credit is a partially refundable credit for educational expenses for a student for the first four years of college. You can claim up to $2,500 per student, and if the credit brings your tax liability to zero, 40% (up to $1,000) will be refunded to you.
The lifetime learning credit is not refundable and covers up to $2,000 in qualified educational expenses per return. While you can only take advantage of the American opportunity tax credit for undergrad expenses, you can reap the benefits of the lifetime learning credit for expenses related to all kinds of educational opportunities, from degree programs to technical classes to improving job skills.
But beware. You can claim both of these education credits on your tax return but not for the same student or the same expenses.
Unemployment benefits
While the pandemic halted a large part of the economy, many Americans found themselves out of work (at least temporarily) and turned to unemployment insurance for help. Though the first $10,200 of unemployment benefits were made tax-free in 2020. This is not the case in 2021. So if you were unemployed in 2021 and did not have taxes withheld from your benefits, plan now to pay taxes on those benefits.
There are other deductions and credits that might be up for grabs depending on your situation. If you don’t want to miss out on any tax savings, you’ll want to work with a tax adviser who can make sure you’re not leaving anything on the table.
This information was pulled from the IRS.gov website or summarized from the IRS code. LL
This article has been presented by TruckerTaxTools.com, a division of Taxation Solutions Inc. – Tax Relief. Barry G. Fowler, EA, president of Taxation Solutions, has been providing IRS tax debt resolution and bookkeeping services to the trucking industry for more than 21 years. If you would like a free consultation, contact them at 877-966-2477. Their website is TruckerTaxTools.com. This article does not give and is not intended to give specific accounting and/or tax advice as everyone’s tax situation is different. Please consult with an expert at TruckerTaxTools.com, the leader in trucker taxes.