The next tax season will bring a rude awakening for many Americans.
Several tax breaks that led to bigger refunds or smaller bills during the last tax season — if not also during the season before that — won’t be available any longer. That’s because they were temporary changes intended to help Americans weather the worst of the COVID-19 pandemic.
Some taxpayers, though, might find themselves better off when they file their 2022 tax return, the one that’s due by April 2023. That’s because of routine inflation adjustments that increase the value of or the threshold to qualify for certain tax credits and deductions.
Whether you are in for a rude awakening or a pleasant surprise this tax season depends in large part on which tax breaks you qualify for. So here’s a look at some ways the tax breaks that were available for the 2021 tax year will differ for the 2022 tax year.
The bad news
Let’s rip the Band-Aid off and get the bad news out of the way first. So up first we have a look at the tax breaks that either have disappeared entirely as of 2022 or that are less valuable — by as much as several thousands of dollars — for the 2022 tax year.
1. No recovery rebate credit
For the past two years, a vast majority of Americans received stimulus payments (which the IRS calls economic impact payments, or EIPs). And for the past two years, those who were eligible for a stimulus payment but didn’t receive one could claim it as tax credit, known as the recovery rebate credit, when they filed their return.
When you filed your 2021 return, for example, your tax pro or tax software likely asked you whether you received the third stimulus payment, which was issued in 2021 and worth $1,400 per eligible person. That was to determine whether you should receive the recovery rebate credit for 2021.
But Congress did not pass legislation authorizing further stimulus payments, so none were issued in 2022. Thus, there’s no recovery rebate credit on 2022 tax returns.
To learn more: If you’re wondering whether you received the recovery rebate credit last tax season, check line 30 of your 2021 return.
2. No charitable deduction for non-itemizers
Generally, taxpayers who choose to take the standard deduction, as opposed to itemizing their tax deductions, cannot write off donations to charities. But a federal law known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 made an exception to that rule, allowing people who claim the standard deduction to write off up to $300 in monetary contributions in 2020 as a way to encourage donations to charities during the pandemic.
Later, that deduction was expanded and extended for 2021, but it has not been extended since then. So people claiming the standard deduction will not qualify for a deduction for charitable donations they made in 2022.
To learn more: If you’re wondering whether you benefited from the charitable deduction for itemizers last tax season, check line 12b of your 2021 return.
3. No earned income tax credit for seniors
For years, one of the most valuable credits in the tax code — the earned income tax credit (EITC) — was unavailable to taxpayers age 65 and older. But a federal law known as the American Rescue Plan Act of 2021 lifted that age limit for the 2021 tax year, which meant that some seniors who worked in 2021 received the EITC when they filed their last return.
That change was effective only for the 2021 tax year, though. In other words, under the current tax code, no seniors age 65 or older will qualify for the EITC for 2022 or future years.
To learn more: If you’re wondering whether you received the EITC or how big it was for you last tax season, check line 27a of your 2021 tax return.
4. No earned income tax credit for young adults under 25
Usually, the earned income tax credit is available to eligible workers from ages 25 through 64. The lower end of that age range was lowered just for 2021 by the American Rescue Plan Act, however, making it available to certain younger workers.
So no one under the age of 25 will qualify for the EITC when they file their 2022 return.
To learn more: If you’re wondering whether you received the EITC or how big it was for you last tax season, check line 27a of your 2021 return.
5. A less valuable earned income tax credit for taxpayers without qualifying children
The total value of the EITC depends in part on how many qualifying children you have. For taxpayers with no qualifying children, the maximum value of this credit jumped from $538 in 2020 to $1,502 in 2021, thanks to the American Rescue Plan Act.
But that was a temporary boost. For the 2022 tax year, those who are eligible for the EITC and have no qualifying children can expect to receive no more than $560.
To learn more: If you’re wondering whether you received the EITC or how big it was for you last tax season, check line 27a of your 2021 return.
6. A less valuable child tax credit
The American Rescue Plan Act also made the child tax credit more valuable for 2021 in a couple of ways, including by:
- Increasing the maximum value of the credit from $2,000 to $3,600 per child.
- Increasing the maximum qualifying age from 16 to 17.
For 2022, the maximum value reverts to $2,000 and the maximum qualifying age reverts to 16. So as the IRS recently put it:
“This means that affected taxpayers will likely receive a significantly smaller refund compared with the previous tax year.”
But as with the earned income tax credit, these changes to the child tax credit were temporary. So it’s safe to say most parents should expect to receive a smaller child tax credit for 2022.
To learn more: If you’re wondering just how big of a child tax credit you received last year, check Schedule 8812, which would have been attached to your 2021 return.
7. A less valuable child care credit
The child and dependent care credit is for working parents. You can learn more about it in “8 Tax Credits and Deductions for Parents.”
It, too, got a big boost for just the 2021 tax year, thanks to the American Rescue Plan Act. The legislation temporarily increased the maximum value of the tax credit from $3,000 to $8,000 per qualifying dependent, and made the credit refundable.
To learn more: If you’re wondering just how big of a child and dependent care credit you received last year, check Form 2441, which would have been attached to your 2021 return.
The good news
What follows is a look at the tax breaks that are more valuable for the 2022 tax year. We’ve rounded up a dozen of them!
1. A bigger deduction for teachers
Since 2002, teachers have been able to deduct up to $250 of classroom expenses for which they were not reimbursed — such as books, supplies and equipment that they use in the classroom and pay for out of pocket.
But starting with the 2022 tax year, the maximum amount of this deduction increased for the first time, to $300. This is not a one-tax-year-only change, either, so the deduction also will be worth up to $300 for 2023 and beyond.
To learn more: See the IRS announcement about this change.
2. Higher standard deductions
Standard deductions generally rise each year on account of adjustments for inflation. For 2022, for taxpayers under age 65, the standard deduction amounts for the following tax-filing statuses are:
- Married filing jointly: $25,900
- Married filing separately: $12,950
- Surviving spouse: $25,900
- Head of household: $19,400
- Single: $12,950
The standard deduction reduces the amount of your income that’s subject to federal taxes. So, if a single person is eligible for and chooses to take the standard deduction (as opposed to itemizing deductions) on their 2022 tax return, they would not be taxed on the first $12,950 of their income from 2022.
To learn more: See our article detailing the standard deductions for 2022 as well as 2023.
3. Higher income brackets
Income tax brackets also tend to rise annually. For 2022, the income brackets are as follows for folks whose tax-filing status is single, for example:
- 10% tax rate: Applies to taxable income of up to $10,275
- 12%: More than $10,275
- 22%: More than $41,775
- 24%: More than $89,075
- 32%: More than $170,050
- 35%: More than $215,950
- 37%: More than $539,900
To learn more: See our article detailing the brackets for 2022 and 2023.
4. Higher contribution limits for (some) retirement accounts
For the 2022 tax year, you may save more money in five types of workplace retirement accounts:
- 401(k) plans
- 403(b) plans
- Most 457 plans
- Thrift Savings Plan
- Savings Incentive Match Plan for Employees (SIMPLE)
The base contribution limit for 401(k) plans, for example, is $20,500.
To learn more: See our article detailing the contribution limits for 2022 as well as 2023.
5. Higher income limits for IRAs
The contribution limits for individual retirement accounts (IRAs) did not increase for 2022, but the income limits did.
The income limits for Roth IRAs determine whether you’re eligible to contribute to such an account at all, whereas the income limits for traditional IRAs determine whether you are eligible to make tax-deductible contributions to such an account.
Both types of income limits have increased for 2022. For example, the income phase-out range for Roth IRA contributions for a single person is $129,000 to $144,000.
To learn more: See our article detailing the IRA income thresholds for 2022 and 2023.
6. Higher contribution limits for HSAs
Workplace retirement accounts are not alone. Contribution limits for health savings accounts (HSAs) also tend to increase each year.
For 2022, the base contribution limits for folks who are eligible for an HSA and have the following types of high-deductible health insurance policies are:
- Self-only coverage: $3,650
- Family coverage: $7,300
To learn more: See our article detailing the HSA thresholds for 2022 and 2023.
7. Higher income limits for the saver’s credit
For 2022, the saver’s credit, officially known as the retirement savings contributions tax credit, has higher income limits.
You might be eligible for this credit for 2022 if you contributed to a retirement account and your adjusted gross income (AGI) was not more than:
- Married filing jointly: $68,000
- Head of household: $51,000
- All other tax-filing statuses: $34,000
To learn more: See the IRS’ “Retirement Savings Contributions Credit” webpage.
8. A more valuable earned income tax credit for taxpayers with qualifying children
The changes to the earned income tax credit for 2022 aren’t bad news for everyone. There’s good news for taxpayers with qualifying children: For them, both the income limits and the maximum value of the earned income tax credit increased.
Such taxpayers might be eligible to claim this credit for 2022 if their AGI was not more than:
- Married filing jointly: $59,187
- All other tax-filing statuses: $53,057
The maximum amount that the EITC is worth for 2022 is $6,935.
To learn more: See the IRS’ “Earned Income Tax Credit” page.
9. A more valuable adoption tax credit
The tax credit for qualified adoption expenses is more valuable for 2022. The maximum allowable credit amount is $14,890 — up from $14,440 for 2021.
To learn more: See the IRS’ adoption tax credit page.
10. A higher gift tax exclusion
Unless perhaps you’ve been fortunate enough to give someone a gift worth at least five figures, you might not have heard of the gift tax. It is a tax that a gift-giver generally owes on the value of a large gift. Smaller gifts are excluded from this tax.
For 2022, the amount of that exclusion is $16,000 — up from $15,000 for 2021. This means that if you give someone a gift worth less than $16,000 this year, you won’t owe the gift tax.
To learn more: See the IRS’ frequently asked questions on gift taxes.
11. A higher estate tax exclusion
The estate tax, sometimes also referred to as the “death tax,” applies to property that is transferred from you to someone else after your death.
The estate tax exclusion was $11.7 million for 2021 and increased to $12.06 million for 2022. That means that if the transferred assets of someone who died last year were worth less than $12.06 million, no estate taxes will be due on it this tax season.
To learn more: See the IRS’ “Estate Tax” webpage.
12. A higher cap on Social Security payroll taxes
The maximum amount of a worker’s income that is subject to Social Security payroll taxes for 2022 is $147,000. This means that if you were fortunate enough to earn more than $147,000 last year, you won’t owe Social Security payroll taxes on every dollar you earned.
To learn more: See our article with the thresholds for 2022 and 2023.
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