By Kristin P Sinclair – A Accu Tax @Sinclair Financial Solutions – July 2, 2022
If you are single your taxable income begins at $12,950.00+
If you are single and age 65 taxable income begin at $14,700.00+
If you are the Head of the Household your taxable income begins at $19,400.00+
If you are the Head of the Household and age 65 your taxable income begins at $21,150.00+
If you are married filing jointly your taxable income begins at $25,900.00+
If you are married filing jointly and one of you is age 65 your taxable income begins at $27,300.00+
If you are married filing jointly and both of you are age 65 your taxable income begins at $28,700.00+
If you are married filing separately your taxable income begins at $5.00+ at any age.
If you are a qualifying widow with dependents your taxable income begins at $25,900.00+
If you are a qualifying widow with dependents and age 65 your taxable income begins at $27,300.00+
If you are legally blind and have signed documentation from your eye doctors office to support this your status your standard deduction increases by $1,400.00 if you are MFJ, QW, MFS each.
If you are legally blind and have signed documentation from your eye doctors office to support this your status your standard deduction increased by $1,750.00 if you are Single or HOH each.
Capital Gains are taxed differently than other types of income.
If you are MFJ or QW Maximum rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $83,500.00
If you are MFS or QW Maximum rate of tax on qualified dividends or qualified capital gain is 15% if your income is less than $517,200.00
If you are Single the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $41,675.00.
If you are Single the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $459,750.00.
If you are HOH the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $55,800.00.
If you are HOH the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $488,500.00.
If you are MFS the rate of tax on qualified dividends or qualified capital gain is $0.00 if income is less than $41,675.00
If you are MFS the rate of tax on qualified dividends or qualified capital gain is 15% if income is less than $258,600.00.
Income above those thresholds will be taxed at 20% unless the 25% or 28% rates apply to your particular situation.
Let’s look at some various examples that could be happening to some folks.
Zelda is retired over 65, and was one of the folks who fortunately survived her Covid-19 experience, and who suffered from Long Haul Covid and still wants to live in her home. She is not interested at this point to moving into any type of care center living arrangement.
Zelda is determined to recover as much as possible. However, Zelda has to make home modifications so that she can remain at home.
Zelda is a single lady who loves the home she owns, loves her neighbors, and wants to stay in her home as long as possible. Zelda lives in a state that does not give her a lot of tax breaks so Zelda will still have ample state taxes due. Zelda has social security income of 19K in 2021, a pension of 19K in 2021, Zelda has an IRA distribution of 19K and Zelda sells 60K of capital gain held long term and her cost basis in her capital gains is 45K and Zelda sells 5k of capital gains which she has held short term and has a cost basis of 1k, Zelda has dividend income of 10K which is qualified and 2k of dividend income which is not qualified.
Zelda does renovations to her home which are medically necessary so that she can continue to reside in her home and none of the renovations are such that she is increasing the value of her home and she spends funds to make her home livable for her medical needs and pays for private nursing help for 4 hours each day for 6 months in 2022. She spends 50K on the modifications and the nursing help, and also of course pays her Medicare premiums and her Medicare supplement premiums, and her pdp and her applicable oop drug costs. And her other doctor bills and hospital cost sharing based upon the medicare supplement. Dental and vision, Zelda spends 65K in qualified medical bills in 2022. Zelda also takes funds out of her savings to pay all the expenses needs to run her home for the 12 month period and cover her meals and home and auto insurances. Zelda will need to plan for next year more cautiously since the private care is still needed in 2023 but all the home modifications have been addressed for the upcoming year.
Nelda is Zelda’s twin sister and lives in a county on the other side of the state line, and also has the same income, but Nelda had previously modified her home when she suffered a medical set back several years ago. In 2022 Nelda pays 15K in additional medical bills which are considered deductible medical expenses.
These two ladies will have very different tax situations when they have Kristin prepare their taxes. Fortunately for Nelda She had made extra payments federally made in the form of estimated payments. So Nelda is feeling confident that 2022 will be okay. She too still needs limited private nursing help and will need to plan for that expense for 2023 and knows that she will be making estimated payment for 2023 as well.
In Nelda’s case her home state offers significant tax breaks since she
A. is over 65 and
B. has long term capital gains taxed at the state level with additional tax breaks.
So Nelda does not have the same federal tax situation as her sister, and does not have the same state tax situation as her sister in 2022.
Everyone that has income above their standard deduction, is going to have to address their own tax obligations, based upon their own unique situation each year.
These two sisters talk daily and enjoy a lunch together via video chat also almost every day. The pandemic encouraged the ladies to learn how to use their computers and phones to improve the quality of life while so much isolation was having to be observed. Have fun they do, and soon they will both be able to spend some more face to face time together and laugh and talk while they are sitting across the table from each other. Sometimes in Zelda’s home and sometimes in Nelda’s home. The ladies are going to make the most of what life offers.
July 2, 2022 – Kristin P Sinclair – A Accu Tax
@Sinclair Financial Solutions | PO Box 4978
Rock Hill, SC 29732 | 803-329-0615 voice | 803-327-4352 fax
Kristin@RHSC.com