Tax planning is the one category of financial planning that is a legal requirement. While the law doesn’t require you to budget, save, invest, or purchase life, disability, or long-term care insurance, for a significant portion of the population of the United States, if you forgo filing tax returns you can face significant legal penalties including fines and even jail time. Also, as opposed to saving and investing, where people plan and work to have the biggest number on the bottom line, when doing their taxes people actually plan and work to have the smallest number possible on the bottom line. While, of course, no one really wants a lower total income, tax strategies and tax-favored products are used to bring taxable income to the lowest point possible through tax-deferral, tax-credits, and tax-deductions. So, by doing some tax-planning, we spend less than we otherwise would on taxes owed to the government and keep more of the money we earn for ourselves and our loved ones.
As a starting point for tax planning, it is important to know and understand the different tax brackets, tax rates, and retirement plan contribution limits. To assist you with this, here is a modified tax reference guide for those who are married and file a joint tax return and for those who are single.
Tax Brackets for 2022
Married Joint Return
$0–$20,550: 10%
$20,551–$83,550: 12%
$83,551–$178,150: 22%
$178,151–$340,100: 24%
$340,101–$431,900: 32%
$431,901–$647,850: 35%
over $647,850: 37%
Single
$0–$10,275: 10%
$10,276–$41,775: 12%
$41,776–$89,075: 22%
$89,076–$170,050: 24%
$170,051–$215,950: 32%
$215,951–$539,900: 35%
over $539,900: 37%
Standard Deduction Amount
Married joint return: $25,900
Single: $12,950
Retirement Plans
IRA & Roth Contributions
Under age 50: $6,000
Age 50 and over: $7,000
Phaseout of Roth IRA Contribution Eligibility
Married joint return: $204,000–$213,999 Modified Adjusted Gross Income (MAGI)
Single: $129,000–$143,999 Modified Adjusted Gross Income (MAGI)
401(k), 403(b), and 457 Contribution Limits
Under age 50: $20,500
Age 50 and over: $27,000
Long-Term Capital Gains & Dividend Rates
Married Joint Return
$0–$83,350: 0%
$83,351–$517,200: 15%
Over $517,200: 20%
Single
$0–$41,675: 0%
$41,676–$459,750: 15%
Over $459,750: 20%
Health Savings Accounts
Single: $3,650
Family: $7,300
Age 55+ Catch-up: $1,000
Gift and Estate Tax
Annual Gift Exclusion: $16,000
Unified Credit Amount: $12,060,000
Once again, this is a modified tax reference guide and only applies to those categories shown. Click here for a more complete breakdown of tax rates, tax brackets, and standard deductions. For comprehensive tax planning we encourage you to visit with a Certified Public Accountant. If you would like help finding a qualified one let us know.
If you are interested in exploring how life insurance can protect you from future tax increases contact us.
