Understanding the latest tax trends will help you make the right decisions in your planning.

 

Although we’re more than a year past the disruptions of COVID-19, 2021 continues to reverberate with its effects. For instance, in a rare move, the IRS extended tax day for US taxpayers until July of 2020. The service made another extension in 2021, giving taxpayers an additional month to file their tax returns by May 2021. 

 

While tax day has come and gone, we still continue to see many trends that will shape tax planning for the rest of this year and well into 2022. This article briefly explains some of the latest tax law trends you should keep in mind and what they might mean for your tax obligations in the coming months. 

 

Income tax cuts

While income tax cuts were generally put on hold last year, they’re experiencing a resurgence in 2021. Several states, including Arizona, Idaho, Iowa, and Ohio have passed legislation cutting income taxes this year. Many more states are considering measures to introduce income tax cuts. 

 

Some of the cuts restructure existing income tax brackets. In Arizona, for example, the government approved a consolidation of the state’s current tax brackets from four to two. Now, the state’s lowest tax rate will be 2.75%, at least for the 2022 tax year. Others affect inheritance rate reductions, such as Iowa’s tax cuts, and some target corporate tax rates, like Nebraska’s two-year corporate tax reduction to 7.25%.

 

The specific tax cuts that might apply to you and how they apply will vary depending on where you live and conduct business. Your tax specialists at Adeptus will help you understand where these cuts apply and how they factor as you go about preparing taxes. 

 

Stimulus payments 

Both at the state and federal level, there has been some favorable treatment of stimulus payments. While this tax law trend began last year, it continues to factor greatly into taxpayers’ and accountants’ strategies for preparing taxes in 2021. 

 

Stimulus payments have been generally treated as tax exempt. While the payments were largely captured in 2020 and 2021 returns, certain adjustments (particularly for the latest round of payments under the American Rescue Plan Act) will continue into 2022. 

 

Essentially, stimulus payments operate as tax credits, which means you can deduct them from your tax liability, dollar for dollar. By implication, if you received $1,400 in stimulus payments, you can take out that same sum from your assessed income. You may be entitled to an additional payment on your 2020 income tax return if: 

• You did not receive any of the previous payments because of processing delays or payment errors; or 
• You received a lower payment or none at all because your 2018 or 2019 adjusted gross income was above the payment threshold. You might be able to apply your 2020 adjusted gross income to qualify for an additional payment. 

 

Tax increases in 2022 budget 

Although discussions on these proposals are still underway, Biden’s tax increases might be one of the most significant changes in tax law this year. The proposed increases will see elevated tax obligations for companies and individuals in the higher tax brackets. 

Some of the proposed changes include a new tax rate of 28% for corporations (increased from the current 21%). There is also a proposed 15% minimum tax on the worldwide book income of large corporations with revenue above $2 billion. 

A new top marginal income tax rate for individuals is also being proposed. The rate will rise from 37 to 39.6% for the highest income earners. In addition, the long term capital gains and qualified dividends of individual taxpayers with adjusted gross income above $1 million will be taxed at income tax rates. 

Contact our experienced CPAs and tax specialists at Adeptus Partners. LLC to learn more about how these tax law trends might impact your tax obligations. Take advantage of our tax preparation services today.