The IRS has issued several new policy changes that may impact those creating or revising estate plans in 2022. The policies impact gift exclusions, long-term care insurance, child tax credits, charitable deductions and tax debt.
IRS Increases the Annual Exclusion Amount in 2022
There are two main types of tax exclusions – the annual gift exclusion and the lifetime federal estate tax exclusion. Both exclusion amounts will increase in 2022. The IRS announced that the annual gift exclusion will rise to allow any person who gifts $16,000 or less to any one individual is exempt from filing a report noting that gift. Typically, form 709, the gift tax return, is required to be filed when a gift larger than the annual exclusion allowed is given to one individual.
The federal estate tax exclusion for the estates of decedents dying during the calendar year 2022 will be $12,060,000 for individuals and $24,120,000 for couples. This is an increase from the previous exclusion amount of $11,700,000 for individuals and $23,400,000 for couples. This lifetime exclusion means that even if you give away more than the $16,000 per year to a single individual, you will only owe taxes if you exceed the $12,060,000 from total lifetime gifts.
Long-term Care Insurance Deductions
The IRS announced that the long-term care insurance deductions will remain the same as 2021. To claim the deduction, a taxpayer’s total unreimbursed medical expenses (which can include premiums for qualified long-term care insurance policies) must be more than 7.5% of the taxpayer’s adjusted gross income. To be a qualified policy, it must have been issued on or before January 1, 1997 and it must offer inflation and nonforfeiture protection.
Child Tax Credits
In 2021, many families with children received advance payments for the child tax credit that would appear on their tax return. Taxpayers who received less than the amount for which they are eligible can claim a credit for the remaining amount on their 2021 tax return. Taxpayers who received more will be responsible for paying back the excess when they file in April 2022. This may lead to surprising expenses for some families expecting to keep the government issued checks.
Charitable Deductions
Taxpayers who do not itemize deductions may qualify to take a charitable deduction up to$300 for individuals and $600 for married couples for any cash contributed made to qualifying organizations.
We see frequent changes in tax policies and while most think only CPAs need to keep up with these new rules, they often impact estate planning as well. At Stouffer Legal, we keep up with IRS policy changes so that we can take them into account during the estate planning process. To set up a comprehensive estate planning session, contact Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
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