For the 2022 tax year, some tax credits are returning to their 2019 levels. This means that affected taxpayers may receive a significantly smaller refund compared with the previous tax year. The changes include reductions in the amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit.
For example, those who received $3,600 per dependent in 2021 for the CTC will now receive $2,000 for the 2022 tax year, if they are eligible. Similarly, eligible taxpayers with no children who received roughly $1,500 in 2021 for the EITC will now receive $500 in 2022. Additionally, the Child and Dependent Care Credit is returning to a maximum of $2,100 in 2022, instead of the $8,000 that was available in 2021.
Another change for the 2022 tax year is that taxpayers who take the standard deduction will not be able to take an above-the-line deduction for charitable donations. This is a reversal of the temporary measure that was implemented during the COVID-19 pandemic, which allowed taxpayers to claim a $600 charitable donation tax deduction on their tax returns.
This means a family with 2 children may receive $9,100 less than 2022. This could cause a taxpayer who normally gets a refund to owe additional dollars to the IRS. It is important to seek a professional to maximize tax savings and deductions to help offset these changes. If you would like to learn more, please reach out anytime.