Fishers homeowners will not be surprised to hear that the U.S. rate of inflation will impact some of their 2022 income tax calculations—the basic income tax tables among them. The Labor Department charted the rate at an annual 6.8% increase through November, although locally, the actual prices paid for many day-to-day purchases were definitely higher than that. Calculating Fishers inflation as experienced here is inexact for a number of familiar reasons—but nobody who shops for groceries or drives more than a mile or two to work hasn’t noticed it.
On Friday, Laura Saunders, the Wall Street Journal’s tax expert, sounded her take on how inflation will affect 2022 federal income tax bills—and the details touching on Fishers real estate provisions led the descriptions.
Modern tax indexing—the way legislators attempt to keep taxes in line with inflation—was enacted in a major way in 1981 but didn’t extend to all provisions. The latest examples are the 2017 $750,000 cap on mortgage debt for which interest may be deducted and the 1997 exemption for profits on home sales ($250,000 for single filers, $500,000 for married couples). Those adjustments may have looked generous in 1997, but not so much today. Saunders calculates that today’s properly inflation-corrected limits would put those profit totals at $411,000 and $822,000.
Even though the current effects Fishers inflation is having may be slow to be acknowledged in Washington, it doesn’t change the great tax advantages that go with owning a home. Nor does the good advice that every expert agrees upon: before making any major financial moves, consult a tax professional for its impact under the latest rules. Another good idea: for all your Fishers real estate initiatives, give us a call!