2022 Tax Update

 Individual Tax

1. SALT deduction (Itemized deduction)

  • Increase from $10,000 to $80,000 through 2030
  • The $80,000 cap amount would also apply to 2021 tax year

2. Credit for qualified plug-in electric drive motor vehicles

  • Max: $12,500 credit and refundable

3. Child tax credit

  • Extend the child tax credit expansion through 2022: $3,600/$3,000
  • Make the entire CTC fully refundable on a permanent basis

4. New surcharge tax

  • 5% if MAGI > $10M;
  • 8% if MAGI > $25M

* MAGI = AGI – Investment interest expense

* For Trust, 5% if MAGI > $200K; 8% if MAGI > $500K

5. EITC: Expand “childless EITC” through 2022

6. Wash sale rule: also apply to foreign currencies, and related parties.

7. Worthless securities

  • Securities expand to include partnership interest and partnership debt
  • If a partner abandons a worthless partnership interest, the loss is a capital loss not an ordinary loss

8. Backdoor Roth IRA conversion: No longer available

  • Current law: 1st make a nondeductible contribution to an IRA, then convert the IRA to Roth IRA

9. IRA contributions

  • Limit IRA contributions when balances reach $10M and
  • Accelerate required minimum distributions for these accounts

II. Business Tax

1. Apply 3.8% net investment income tax to active business income

  • Include income derived in the ordinary course of business, even if the taxpayer actively participates in such business
  • Not include income subject to SE taxes, wages on which FICA taxes are imposed
  • Impact S Corp owners with MFJ > $500K or Single > $400K

2. Excess business loss limitation enacted in TCJA: permanent

  • Carryforward EBLs will no longer become part of a taxpayer’s net operating loss
  • Treat as a business deduction and is thus subject to testing and limitation in subsequent years