The world is beginning to return to normal three years after the COVID-19 pandemic and you may expect tax changes this year.
Millions of Americans are filing their 2022 federal income tax returns with a variety of expiring pandemic policies.
IRS Tax Changes
Lawmakers and the IRS alter taxes every year. Those used to large profits may perceive these alterations as significant. Kathy Pickering, the chief tax officer of H&R Block, recommends that taxpayers prepare for these regulatory changes.
Most tax preparers and software apps include the most recent adjustments automatically, but it never hurts to double-check. To receive your return as quickly as possible, accurately, and electronically file your taxes. This year’s tax season features significant changes:
1. Increase In Income Threshold
Each year, the IRS modifies tax brackets and other regulations in reaction to inflation. After years of record inflation, the government readjusted the income thresholds used to determine tax brackets.
Keep in mind that the United States has a progressive tax rate structure, so your salary bracket does not determine your overall tax payment. Your income is taxed based on your bracket.
2. Higher Standard Deduction
As a result of the Tax Cuts and Jobs Act of 2017, the IRS allows you to claim the standard deduction from your taxes.
In 2022, the standard deduction for single filers increased by $400 to $12,950. Couples filing jointly pay $800 more ($25,900 total) in taxes.
3. No Federal Stimulus Checks
In March 2021, the federal government issued its final COVID-19 stimulus checks and recommended anyone who did not receive them claim the recovery rebate credit on their income tax returns. Finished.
For 2022 taxes, only state stimulus checks apply. Last month, the IRS confirmed that relief payments are not required to be reported as income by the majority of recipients. Most states consider rebates to be welfare payments or disaster relief funds, exempting them from taxation.
But, Georgia, Massachusetts, South Carolina, and Virginia should carefully review the fine print. Beneficiaries may be taxed.
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4. Normalized Child Tax Credit
In 2021, Congress temporarily increased the child tax credit to $3,600. It didn’t renew the expansion, thus the child tax credit returned to $2,000 per dependent.
More: The earned income tax credit and maximum child and dependent care credit dropped. The $300 charitable deduction for non-itemizers expired.
Jackson Hewitt’s chief tax information officer, Mark Steber, said pandemic policy changes are giving individuals unexpected balances. He claims that the amount owed by people is doubling.
Many individuals were used to taxing refunds of $3,000; however, they now either receive nothing or owe money.
5. Changes In Clean Energy Credits
According to Lee Reams of Tax Buzz, the Inflation Reduction Act, which was signed into law in August by President Joseph Biden, altered certain environmental tax credit requirements.
The majority of tax-related changes did not take effect until January and will not affect your taxes until the following year, with a few exceptions.
Solar panel installations completed in 2022 are eligible for the improved residential clean energy credit. Electric vehicles must be manufactured in North America after August to qualify for the tax credit.
6. Lower Tax Refund
The IRS has warned taxpayers of reduced tax refunds since November. Initial evidence suggests these concerns were justified: The average refund was $3,140 on February 17, 2019, down 11% from $3,536 in 2022).
Your refund may be late as well. To avoid concerns about delays, the IRS issued a press statement advising taxpayers not to expect on receiving a 2022 federal tax refund by a specific date, especially when making significant purchases or paying payments.
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