2022 AFBA Financial Planning Guide

brackets or have reduced value from credits and deductions due to inflation, instead of any increase in real income. Step 5 — Identify Tax Credits. The tax law provides a number of situations, called tax credits, which can be used to directly reduce the taxpayer’s final tax liability. Examples include an education credit, a child tax credit, a credit for the unique expenses associated with child or dependent care, a credit for the elderly or disabled, an adoption credit, and a credit for the payment of foreign taxes. Married couples filing jointly who make under $400,000 per year and single individuals, head of household, or married couples filing separately who earn less than $200,000 per year, will be able to take up to $3,600 per child as their Child Tax Credit. Alternative Minimum Tax (AMT). The Alternative Minimum Tax was created to prevent high-income taxpayers from avoiding individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two. The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly. However, this exemption phases out for high-income taxpayers. In 2021, the exemption will start phasing out at $523,600 in AMTI for single filers and $1,047,200 for married taxpayers filing jointly. 15–3. WHEN TO FILE YOUR RETURN. Tax returns for 2021 are due April 18, 2022. This filing deadline may be extended for a period of six months. Extension requests should be submitted before the filing deadline to the IRS on Form 4868. However, an extension of time to file is not an extension of time to pay. If you owe, you should pay the IRS on or before the deadline to avoid penalties and interest. If you are physically living outside the U.S. or Puerto Rico on the filing deadline, you are automatically entitled to a three month extension (until July 15) without submitting an extension request. 15–4. COMBAT ZONE. For enlisted and warrant officer personnel, all taxable military pay in a given month is excluded from taxation if service is performed in a

2021 Federal Income Tax Brackets SINGLE TAXPAYERS

If Taxable Income Is

Your Tax Is

Over This

But Not Over

$0

$9,950 $40,525 $86,375 $164,925 $209,425 $523,600

10% of the amount over $0 $995 plus 12% over $9,950 $4,664 plus 22% over $40,525 $14,751 plus 24% over $86,875 $33,603 plus 32% over $164,925 $47,843 plus 35% over $209,425 $157,804 plus 37% over $523,600

$9,950 $40,525 $86,375 $164,925 $209,425 $523,600

no limit

MARRIED FILING JOINTLY or QUALIFYING WIDOW(ER)

If Taxable Income Is

Your Tax Is

Over This

But Not Over

$0

$19,900 $81,050 $172,750 $329,850 $418,850 $628,300

10% of the amount over $0 $1,990 plus 12% over $19,900 $9,328 plus 22% over $81,050 $29,502 plus 24% over $172,750 $67,206 plus 32% over $329,850 $95,686 plus 35% over $418,850 $168,994 plus 37 % over $628,300

$19,900 $81,050 $172,750 $329,850 $418,850 $628,300

no limit

MARRIED FILING SEPARATELY

If Taxable Income Is

Your Tax Is

Over This

But Not Over

$0

$9,950 $40,525 $86,375 $164,925 $209,425 $314,150

10% of the amount over $0 $995 plus 12% over $9,950 $4,664 plus 22% over $40,525 $14,751 plus 24% over $86,375 $33,603 plus 32% over $164,925 $47,843 plus 35% over $209,425 $84,497 plus 37% over $314,150

$9,950 $40,525 $86,375 $164,925 $209,425 $314,150

no limit

HEAD OF HOUSEHOLD

If Taxable Income Is

Your Tax Is

Over This

But Not Over

$0

$14,200 $54,200 $86,350 $164,900

10% plus over $0

$14,200 $54,200 $86,350 $164,900 $209,400 $523,600

$1,420 plus 12% over $14,200 $6,220 plus 22% over $54,200 $13,293 plus 24% over $86,350

$209,400 $32,145 plus 32% over $164,900 $523,600 $46,385 plus 35% over $209,425

no limit

$156,355 plus 37 % over $523,600

CHAPTER 15: FEDERAL & STATE TAXES

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