Fox Accounting & Tax Services Inc.                                    (503)246-6994   Income Tax Preparation, Payroll & Bookkeeping Services

Beginning with tax year 2018, the Congress limited the amount an individual may deduct for state and local income taxes to $10,000.  That limit had a big impact on the total tax paid for many of our clients. Last fall, the IRS announced, with respect to pass-through entities (LLCs or other entities taxed as partnerships or S corporations), that, if state law allows or requires the entity itself to pay state and local taxes (which normally pass through to the owners of the entity), the entity will not be subject to the $10,000 state and local taxes deductibility cap (the “SALT Cap”).

For tax years 2022 and 2023 only, Oregon has enacted SB 727 which gives pass-through entities an opportunity to elect to be liable and pay a “business alternative tax" to the state of Oregon.  This tax will be 9% on pass through income (for businesses with $250,000 or less in pass through income.  The rate increases to 9.9% for businesses with income above this amount).

The mechanics of this federal and state legislation appears to be as follows:

• The pass through entity pays the state tax on profits.
• The pass through entity deducts the full amount of this state tax on their return.
• The shareholder or partner repots the income net of that tax on their return
• The shareholder or partner reports a credit on their Oregon return for the taxes paid on their behalf.

The end result is that the state tax on this income is deducted in full.  The $10,000 Salt limit can then be used for property taxes and state income tax paid on other income.  Again, this legislation applies to only 2022 and 2023.  This is brand new legislation. There will be some complexities that we have not addressed here.

Many of you will have some new tax forms to file this year as there are two new, local taxes taking effect.  There is a new 1% income tax that will impact metro area residents with taxable incomes of $125,000 for single filers or $200,000 for joint filers. This tax will also be applicable to Metro area businesses with gross receipts of $5,000,000 or more. 

Additionally, Multnomah County has a new 1.5% personal income tax for county residents.  This tax has the same thresholds of $125,000 in taxable income for single filers and $200,000 for married filers.  The rate increases by an additional 1.5% for higher income individuals, kicking in at $250,000 for single filers $400,000 for married joint tax returns.

If you are subject to these taxes, check with your employer to see if you can set up withholding.

Both of these tax programs were approved by voters in November of 2020 and were intended to support specific social programs. The Metro tax, or Supportive Housing Services tax, is earmarked for housing the homeless. The County tax, or the Preschool For All Tax, was enacted to support preschool services.  To learn more about these taxes or the programs that they fund, see the following links:


Metro's Supportive Housing Services website
Multnomah County’s Preschool for All website

2021 Standard Mileage Rates:

• 56 cents per mile for business purposes
• 16 cents per mile for medical or moving purposes
• 14 cents per mile for charitable purposes

2022 Standard Mileage Rates:

• 58.5 cents per mile for business purposes
• 18 cents per mile for medical or moving purposes
• 14 cents per mile for charitable purposes

2022 Meal Allowances:

The daily meal allowance for most us locations is $64 and $74 for high-cost localities. 50% of this will generally be deductible for business travel meals. You can look up the per diem rates for specific locations here  The rate for transportation workers (truckdrivers) is $69 with a deductible rate of 80%.

2021 Retirement contribution limits:

Individual Retirement Accounts. The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains at $6,000 for 2021. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. 

Roth IRA Phase-Outs.  In 2021, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $198,000 to $208,000 for married couples filing jointly, up from $196,000 to $206,000 in 2020. For singles and heads of household, the income phase-out range is $125,000 to $140,000, up from $124,000 to $139,000 in 2020.

The SIMPLE. The contribution limit for SIMPLE retirement accounts is unchanged at $13,500 for 2021. The SIMPLE catch-up limit is still $3,000.

Employee 401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2021—for the second year in a row. The catch-up contribution limit for employees age 50 or older in these plans also remains steady: it’s $6,500 for 2021. Even if you don’t turn 50 until December 31, 2021, you can make the additional $6,500 catch-up contribution for the year.  Please note that these are the maximum numbers.  Contributions are limited to 25% of compensation.  

SEP IRAs and Solo 401(k)s. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $57,000 in 2020 to $58,000 in 2021. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $285,000 in 2020 to $290,000 in 2021. 

2022 Retirement Contribution Limits:

IRA's. IRA contribution limits remain at $6000 with a $1000 age 50 catch up amount for 2022. Phase out ranges are $204000 to $21400 for married joint $129,000 to $144,000 for single filers.  Once your income reach these upper limits Roth IRA contributions will be limited to zero.  

Employee 401(k) contributions for 2022 will top off at $20,500—a $1,000 increase from the $19,500 cap for 2021 and 2020—the IRS announced on Nov. 4. Plan participants age 50 or older next year can contribute an additional $6,500.

SIMPLE contribution limits are up to $14000 over 2021's $13500.  The age 50 and older catch up contribution remains unchanged at $3000.

Employee 401(k)s.  The 401(k) contribution limit will increase to $20,500 in 2022.  The cath-up contribution for participants over age 50 remains the same at $6500.

SEP IRAs and Solo 401(k)s - The IRS increased 2022 contribution limits for self-employed persons who contribute to a SEP IRA or Solo 401(k) from $58,000 to $61,000. For those 50 or older, there is also a $6,500 catch-up contribution amount allowing total contributions in 2022 of $67,500.


2021 HSA Contribution Limits:

An individual with coverage under a qualifying high-deductible health plan (deductible not less than $1,400) can contribute up to $3,600 — up $50 from 2020 — for the year to their HSA. The maximum out-of-pocket has been capped at $7,000. An individual with family coverage under a qualifying high-deductible health plan (deductible not less than $2,800) can contribute up to $7,200 — up $100 from 2020 — for the year. The maximum out-of-pocket has been capped at $14,000.An additional catch-up contribution of $1,000 per year is available for individuals 55 and older. If your spouse is also 55 or older, he or she may establish a separate HSA and make a “catch-up” contribution to that account.

2022 HSA Contribution Limits:

The annual inflation-adjusted limit on HSA contributions will be $3,650 for self-only and $7,300 for family coverage. That's about a 1.4 percent increase from 2021.  The catch up amount for individuals 55 or over remains unchanged at $1000.
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