IRS Updates Mid-November

Charitable Giving Deduction

The IRS reminds taxpayers that they can take advantage of a special tax provision to easily deduct up to $600 on their 2021 return. Typically, those who choose to take the standard deduction cannot claim charitable contribution deductions, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended this temporary provision through the end of 2021. Single filers may deduct up to $300 for cash contributions, and those married filing jointly may deduct up to $600. Qualified charities can be found using the IRS Tax Exempt Organization Search tool. 

401(k) Limit Increase Announced

The IRS has announced that the contribution amount for 401(k) plans in 2022 will be $20,500, up from $19,500. Income ranges for determining eligibility to make deductible contributions to traditional and Roth IRAs, and to claim the Saver’s Credit, also are increased. The limit on annual contributions to an IRA remains unchanged at $6,000, as does the $1,000 IRA catch-up contribution limit for those aged 50 and over. Other cost-of-living adjustments for 2022 are in Notice 2021-61.

Inflation Adjustments Announced

The 2022 annual inflation adjustment for more than 60 tax provisions, including tax rate schedules, have been announced. These adjustments generally apply to tax returns filed in 2023. The standard deduction for married couples filing jointly will be $25,900, $800 more than the current deduction. Single taxpayers or married individuals filing separately will have a standard deduction of $12,950 and for heads of households it will be 19,400. The maximum Earned Income Tax Credit amount is increased, as are the monthly limitation for parking, foreign earned income exclusion, the Alternative Minimum Tax exemption amount, and many more.

Unemployment Compensation Exclusion FAQ

The IRS has updated its Frequently Asked Questions (FAQs) on the 2020 unemployment compensation exclusion. The updated topics include Amended Returns (1040-X), Receiving a Refund, Letter, or Notice, and Post Unemployment Compensation Exclusion Adjustment. FAQ pdf fact sheet is available here.