A tax refund is a significant silver lining of enduring winter, but if you’re anticipating a large refund in 2023, you should expect to receive less than in past years.
Smaller Tax Refund
Experts and even the IRS warned that tax refund sticker shock may occur early next year for 2022 returns due to the expiration of pandemic benefits that bloated refund checks in 2021.
Included in this are the enlarged child tax credit, the child and dependent care credit, and government stimulus monies.
NextAdvisor’s Alex Gailey commented, If you regularly owe money during tax season, you may owe slightly more in 2023 since fewer credits will be available.
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What To Consider During Tax Season?
- Reduction in tax credits: The American Rescue Plan of 2021 granted certain tax benefits to parents and carers, but they did not apply to this tax year. In 2021, providers were entitled to claim $3,600 per kid under the age of 6, but for the 2019 tax year, that credit has been reduced to the regular $2,000. In addition, the child and dependent care tax credits, which in 2021 were increased to $8,000 for one child and $16,000 for two or more children, are now back to the usual $3,000/$6,000 caps.
- Charitable deductions are more difficult: In 2021, you could take a $300 charity deduction (or $600 for married couples filing jointly) even if you did not itemize and instead took the standard deduction. This is not the case current filing season. Those who wish to benefit from charitable contributions must itemize their deductions, and all itemized deductions (including philanthropic contributions) must exceed the standard deduction.
However, the Internal Revenue Service revealed some good news regarding deductions: married couples filing jointly will be permitted a standard deduction of $27,700, an increase of $1,800.
The standard deduction for single taxpayers and married couples filing separately has increased by $900, to $13,850.
This figure has increased by $1,400 for household heads to $20,800.
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