The tax code is full of benefits designed to help individuals and businesses. These benefits can come in the form of deductions, credits, and exclusions, and they can significantly reduce your tax liability, leading to a larger tax refund. However, these benefits are not always permanent, and some significant changes were made for the 2022 tax year that could impact the size of your refund.
This article explores the impact of expired tax benefits from 2021 on your 2022 tax return and what to expect moving forward.
Reduced Child Tax Credit
One of the most significant changes for 2022 is the reduction in the Child Tax Credit. In 2021, the credit was significantly increased, reaching $3,600 for children under age 6 and $3,000 for older children. However, for 2022, the credit has reverted to its pre-pandemic levels, with a maximum credit of $2,000 per qualifying child. Additionally, only $1,500 of this credit is refundable for certain income levels, and the credit no longer applies to 17-year-olds.
Changes to Dependent Care Credit
The Dependent Care Credit also underwent changes for 2022. This credit helps offset childcare expenses for working families. In 2021, the credit was a flat 50% of qualified expenses (up to $8,000 for one child and $16,000 for multiple children) and was fully refundable. Unfortunately, for 2022, the credit is no longer refundable and the credit percentage ranges from 20% to 35%, based on your income, with maximum allowable expenses of $3,000 for one child and $6,000 for multiple children.
No Recovery Rebates in 2022
The Recovery Rebates, also known as economic impact payments, were a series of stimulus checks issued by the government in 2020 and 2021 to help individuals during the COVID-19 pandemic. These rebates were not considered taxable income and were not included on your tax return. However, there were no Recovery Rebates issued for the 2022 tax year.
Employee Retention Credit Ended
The Employee Retention Credit was another pandemic-related benefit designed to help businesses retain employees by offering tax credits based on qualified wages paid. This credit was available for qualified wages paid in 2021, but it is no longer available for 2022 or subsequent tax years.
What to Do Now
While the expiration of these benefits may result in a smaller refund for 2022, it’s important to remember that your tax situation is unique. It’s crucial to consult with a tax professional who can help you understand the full impact of these changes on your tax return and offer personalized advice based on your specific circumstances. Additionally, you can adjust your tax withholding for the 2023 tax year to ensure you receive a more predictable refund throughout the year.
Need help?
For further information or assistance with understanding how these changes affect your specific situation, it’s recommended to consult with a tax professional. Additionally, you can adjust your tax withholding for 2023 to avoid unexpected surprises next year.
By staying informed and seeking professional guidance, you can navigate tax season with confidence and ensure you are filing accurately and efficiently.
