Updated: Feb 15
Tax season is here which means it’s time to start thinking about filing your 2022 taxes. Before you start, we’re here to make sure you’re up to date on some of the significant changes that have happened over the past year that could affect your tax return.
In this article, we’re going to provide you with a list of a few things that have changed and a few things that are carrying over from the previous tax season.
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Here’s a list of a few recent congressional acts and their tax implications affecting your 2022 taxes:
The Taxpayer Certainty and Disaster Relief Act of 2020 - Continues for 2022
This act initially allowed for a 100% Per Diem deduction only if the food was purchased from a restaurant for 2021 and 2022. However, the IRS changed this rule and announced that for 2021 and 2022, all Per Diem is able to be deducted at 100% regardless of if the food was purchased from a restaurant or not. And this applies to both self-employed CDL drivers, and ride-alongs, if those ride-alongs have a business purpose. Beginning 1/1/2023 the Per Diem allowance returns to the normal 80% rate.
The Inflation Reduction Act
The Inflation Reduction Act was signed into law on August 16, 2022. To the average self-employed truck driver, this act in many ways will have little to no effect on the way you conduct your business currently. However, it does provide new opportunities for tax savings and things to watch out for over the next 10 years.
IRS Tax Enforcement
We believe the biggest provision self-employed truck drivers should be aware of is the $80 billion investment in the IRS over the next 10 years. With this investment, the IRS plans on hiring 87,000 IRS agents. Tax professionals are hopeful that taxpayers will receive better customer service from the IRS and these funds should allow the IRS to make up ground with the backlog of unprocessed tax returns. However, an increase in the number of IRS agents means an increase in the importance of filing and paying your taxes correctly and on time. This is because the IRS plans on spending more than half of the $80 billion in funding on enforcement activities such as collections, IRS legal support, and criminal investigations.
Climate-Related Tax Credits
The Inflation Reduction Act provides roughly $369 billion in incentives for energy and climate-related programs. Many of the incentives will be seen in the form of tax credits. If a trucker or fleet has been on the fence about purchasing electric vehicles, these tax credits could push them to do so. However, does this mean you should go out and purchase an electric vehicle solely for the tax credit? Not necessarily. If you are considering a purchase of an electric tractor be sure to get all the facts first.
Health Insurance and Care
The Inflation Reduction Act will extend some of the subsidies brought on by the Affordable Care Act. Specifically, it extends the subsidies for health insurance premiums available through the federal marketplace or exchange. These subsidies had been set to expire in 2023 but the Inflation Reduction Act has extended these subsidies through the end of 2025. Owner-operators in need of health insurance can search the Federal Marketplace to see if they qualify for a subsidy. Be careful when applying for a subsidy to make sure your income levels qualify. Additionally, a goal of the Inflation Reduction Act is to lower some healthcare costs overall. Out-of-pocket drugs will be capped at $4,000 by 2024 and $2,000 by 2025.
For our complete Inflation Reduction Act article: Click Here
The American Rescue Plan Act
This act provided the $1,400 stimulus checks per family member. These checks needed to be reconciled on the 2021 tax return. There were no new stimulus checks in 2022 which means there is no credit to be claimed on your 2022 tax return.
This act also expanded the Child Tax Credit temporarily. For 2021, parents with children under age 6 received a credit up to $3,600/child for And for kids over age 6 but under age 18, parents received a credit up to $3,000/child. The IRS also provided advanced payments of $300/month (for kids under age 6) and $250/per month (for kids over 6 and under age 17).
For 2022, the Child Tax Credit has reverted back to $2,000 per child under the age of 17. Additionally, the optional monthly advance of the Child Tax Credit no longer exists. This reduction of the Child Tax Credit may result in unexpected tax liabilities or smaller-than-expected refunds during your 2022 tax filing.
The Child and Dependent Care Credit increased for children under the age of 13, and for children who are disabled. The credit amount allowed is 50% of the expenses paid for childcare with a maximum of $4,000/dependent and a maximum of 2 dependents. This credit is also now a refundable credit which means if you don’t owe any taxes, they will add the credit amount to your refund check.
Beginning in 2018, the IRS allowed your business to take an immediate first-year deduction on any asset purchased during the year. This is because any qualified property purchased and placed in service between September 27, 2017, and December 31, 2022, was able to be depreciated by 100% of the cost of the property.
If the tax law doesn’t change, then starting in 2023, the bonus depreciation goes down by an additional 20% each year. This means that in 2023 depreciation will be 80%, 2024 will be 60%, 2025 will be 40%, 2026 will be 20%, and in 2027 there will be no bonus depreciation. The cost of the depreciated piece of property will be recognized as an expense and lower your taxable income.
Retirement Distribution Repayment Option
In 2020, the IRS allowed taxpayers to distribute, penalty-free, from their retirement accounts if they were distributions related to COVID. Taxpayers were also allowed the choice to repay that distribution over a period of three years (2020, 2021, 2022). If a taxpayer does repay their distributions, partially or in full, they will have to go back and amend their tax return in order to avoid paying taxes on those COVID-related distributions. 2022 is the last year to choose to repay any amount of your distributions.
The charity deduction was expanded for the 2021 Tax Year to $300 per person. This meant Married Filing Jointly taxpayers can deduct up to $600 of charitable donations in addition to claiming the standard deduction. This deduction has gone away. Only taxpayers who itemize their deductions in 2022 are entitled to a charity deduction.
This was a credit for self-employed individuals that missed work either because they had COVID, or because they were caring for a family member that had COVID. This credit has expired which means you aren’t able to claim this type of credit on your 2022 taxes.
The bottom line is that being aware of these changes can potentially save you money on your taxes. Many of these changes could be temporary, so make sure you’re taking advantage of them now while they are available. If you have any questions, feel free to give us a call at (866) 920-2827 or email us at firstname.lastname@example.org.
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