The biggest tax changes to know before filing your 2022 return

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Some tax credits have been reduced

One of the possible reasons for a lower tax refund is the child tax credit and the child and dependent tax credit have been reduced for 2022, explained certified financial planner Cecil Staton, president and wealth advisor at Arch Financial Planning in Athens, Georgia.

While both tax credits received a temporary boost from the 2021 US bailout, the enhanced tax relief was not extended until this year. “The bigger picture is that a lot of people will see less money in their pockets,” Staton said.

In 2021, the Child Tax Credit offered up to $3,600 per child under age 6 and up to $3,000 per child ages 6 to 17, with half available through upfront payments. But for 2022, the tax relief reverts to the previous amount — up to $2,000 per child under 17.

The Child and Dependent Tax Credit, which can help offset the cost of caring for children under 13 or dependent adults, has also been reduced for 2022.

In 2021, the credit increased to $8,000 for one eligible person or $16,000 for two or more dependents. However, for 2022, those limits are down to $3,000 and $6,000, for one or more dependents, respectively.

You can get Form 1099-K for third-party payments

If you received payments through apps like Venmo or PayPal in 2022, you can get Form 1099-K in early 2023which reports revenue from third-party networks.

The form applies to business transactions, such as part-time work, side jobs, or the sale of property, according to the IRS.

Prior to 2022, the federal Form 1099-K reporting threshold was for taxpayers with more than 200 transactions with an aggregate value greater than $20,000. Now, however, the threshold is only $600, and even a single transaction can trigger the form.

Austin Chau, CFP and wealth advisor at Menlo Asset Management in Menlo Park, Calif., said personal transactions such as reimbursing your roommate for bills or dinner are not taxable.

Plus, you’ll only have to pay income taxes, he said. For example, if you spent $150 on concert tickets in 2022 and sold them for $200, the $50 profit is taxable, Chau said.

While the IRS says you shouldn’t receive Form 1099-K for personal transfers, experts say it’s possible, and the mistake may require you to contact the issuer or make adjustments to your tax return.

It is more difficult to claim the charitable deduction

Your tax refund may also be lower because it is more difficult to claim the charitable deduction in 2022.

Marguerita Cheng, CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, said you won’t get charitable tax relief in 2022 if you don’t itemize deductions on your return.

Congress gave charities a boost in 2021 by allowing single donors to claim a deduction of up to $300 for cash donations or $600 for married couples who deposit together, whether you detail or notsaid Cheng, who is also on CNBC. Financial Advisory Board.

However, the tax relief has not been extended for 2022. Now you will only get it if your itemized deductions, including charitable donation tax relief, exceed the standard deduction, which is less common. . In 2019, nearly 90% of taxpayers used the flat-rate allowance, according to the tax authorities.

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