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Personal, estate, and business tax planning strategies for 2022

February 11, 2022
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As the new year begins, many federal tax policies and priorities remain in flux. The consistent themes are the prospect of change coupled with uncertainty around what that change may be.

In the past, planning has often been straightforward. Reliable strategies have usually included reducing and deferring income, shifting income, and increasing deductions. While planning for 2022 may be more challenging, there are still dependable income, estate and business planning opportunities to consider for your clients.

Individual taxpayers

Congress is looking for ways to close tax loopholes, and if no action is taken, many of the tax provisions passed in 2017 (the Tax Cuts and Jobs Act, or TCJA) will expire at the end of 2025. Even in an environment of uncertainty, there are several strategies that you may recommend for your clients to consider.

Defer income

For most taxpayers, ordinary income tax rates aren’t likely to change soon, so you might suggest that clients delay asset sales or defer receipt of other income until next year.

Analyze capital gains and net investment income

While a capital gains rate increase is unlikely in the near term, it still may be worthwhile to regularly examine a client’s asset mix as part of your planning. If they have appreciated investments they’re planning to sell, determine whether they have other assets that carry losses, which you could also sell this year to offset the gains. And don’t forget about the net investment income tax (NIIT), which is an additional 3.8% tax that applies to certain investment income earned at an adjusted gross income (AGI) of $250,000 or more for joint filers. You might encourage clients to spread out investment sales from year to year to minimize the capital gains rate and NIIT.

“Bunch” their deductions

Because the 2021 and 2022 standard deductions are relatively high ($25,100 in 2021 and $25,900 in 2022 for married couples filing jointly), it isn’t worthwhile for many taxpayers to itemize deductions. One strategy is to accumulate deductions that a client would normally take over 2 years into a single year. For example, they could make most of their charitable contributions and medical expenditures in a year they plan to itemize.

Optimize retirement plan contributions

The maximum allowable 401(k) contribution for 2022 is $20,500, with a $6,500 additional contribution, if the plan allows, for taxpayers who are 50 and over. These contributions are made with pretax money, lowering the client’s overall tax bill for the year. Even if the client can’t contribute the maximum amounts, they should make sure they are contributing enough to take full advantage of any employer match. Encourage contributions to an individual retirement account (IRA) and a health savings account (HSA), too.

Make sure they take their required minimum distributions

Clients who are age 72 or over must take required minimum distributions (RMDs) from their qualified plans and IRAs.

If you have a client who is 70½ or older and would like to donate more to charity, remember that up to $100,000 can be distributed from their IRA to a charity, and it can be used to satisfy their RMD. This qualified charitable distribution (QCD) must be made directly from their IRA to the charity to avoid inclusion in income, and it must be made to a qualified public charity.

Consider a Roth conversion

For those who are eligible, a Roth conversion could make sense. It could be beneficial to convert some or all of a traditional IRA account to a Roth IRA if the client expects to be in a lower income tax bracket for 2022 than in future years. Keep in mind that this transaction will result in taxable income this year, but future income from the Roth IRA will be tax free, assuming certain distribution rules are followed.


There are several steps that business owners may want to take in 2022 to minimize taxes.

Defer income

Like individuals, businesses holding investments and other capital assets should consider other income, gains and losses when determining when to sell capital assets. Currently, there is only one federal corporate income tax rate, so corporations don’t run the risk of hitting a higher bracket because of a capital asset sale. Gains from sales by pass-through companies will flow through to their owners’ individual returns, so close attention should be paid to the individual owner’s other income when determining whether a pass-through company should sell investments this year.

Accelerate deductions

Business owners who purchased new equipment in 2021 or plan to in 2022 should know that the TCJA allows 100% first-year bonus depreciation for eligible equipment and machinery purchased before January 1, 2023. Additionally, businesses with AGI of $2,700,000 or below can deduct up to $1,080,000 for qualifying Section 179 property placed in service in 2022.

Informally fund nonqualified deferred compensation plans

If the business has a nonqualified deferred compensation plan for key employees, it may make sense to informally fund that plan in 2022 to ensure the company has the cash flow to meet the future obligation. Life insurance or mutual funds may be suitable investments to informally fund the plan.

Estates and trusts

During 2021, Congress considered decreasing the estate tax exemption, doing away with the stepped-up basis on certain assets passed at death, taxing certain unrealized capital gains, curtailing valuation discounts and including grantor trust assets in the taxable estate. While these changes aren’t likely to happen in 2022, these proposals provide a glimpse into what Congress may change in the future. Considering current law and possible changes, estate planning should be flexible and ultimately accomplish your clients’ goals regardless of the tax law.

Determine your client’s net worth

Even if a client thought they would not be subject to estate or gift tax once the TCJA was enacted, you may want to re-examine the value of their assets to determine whether they exceed a lower exemption amount. In 2026, TCJA’s larger exemption will be reduced from $12,060,000 in 2022 to about $6 million per person ($5 million per person adjusted for inflation). With stock market gains and property value appreciation, a client could end up with a taxable estate in the next few years. Also, many states have much lower estate tax exemptions than the federal exemption, so if your client lives in a state with an estate or inheritance tax, it could be worthwhile to plan for it.

Ramp up gifting

Ultra-high net worth families who can afford to make large gifts may consider using their entire exemption for gifts in 2022. While gifts up to the $12,060,000 limit should not be brought back into their estate if the exemption is reduced in the future, any exemption amount between today’s exemption and a future, lower exemption could be lost if not used.

Pre-fund trusts

Using an irrevocable life insurance trust (ILIT) to provide an income tax-free death benefit outside of the taxable estate is a common estate planning technique. Even if premiums are due over several years in the future, a client could make a large gift to an ILIT today to provide a reserve account that the trustee may use to pay upcoming premiums without additional gifts. It could also be advantageous to make current gifts to other types of trusts that are part of a client’s overall legacy plan.

Manage trust income

If a client is a trustee or beneficiary of a current trust, such as a credit shelter trust of a deceased loved one, keep income taxes in mind. In 2022, trust income of $13,451 or over is taxed at the highest tax rate of 37%. Nongrantor trusts get a tax deduction for income distributed to beneficiaries, so income can be managed by optimizing the amount of income that is retained in the trust and that which is distributed to beneficiaries.

Remember the sunsets

While it’s still a few years off, several provisions of the TCJA are scheduled to revert to prior law at the end of 2025. A few have already been mentioned. Some of the significant provisions of the TCJA expiring in 2025 include:

  • Reduction in individual income tax rates
  • The TCJA’s increased child tax credit (the expanded child tax credit under the American Rescue Plan expired at the end of 2021)
  • Higher alternative minimum tax exemption
  • Qualified business income deduction for certain pass-through companies
  • Employer credit for paid family and medical leave
  • Suspension of miscellaneous itemized deductions and limitation on itemized deductions
  • Suspension of personal exemptions
  • Limitation on deduction for qualified residence interest and suspension of deduction for home equity loan interest
  • Cap on deduction for state and local taxes
  • Increased allowance for charitable contributions of cash
  • Limitation on excess business losses of noncorporate taxpayers
  • Increased estate and gift tax exemption
  • Increased standard deduction


Regardless of uncertainty about tax law changes, there are a multitude of tried-and-true tax planning strategies that work in any environment. You and your client’s tax advisor can work together to come up with an effective overall plan that addresses taxes and nontax goals.


  • This information is general in nature and is not intended to be tax, legal or other professional advice. Federal income tax laws are complex and subject to change. The information presented here is based on current interpretations of the law and is not guaranteed.

    Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.