With just one week to go before the April 18 IRS filing deadline, changes to 2022 tax credits and deductions could result in lower refunds for some taxpayers.
The loss of above-the-line charitable deductions could result in a lower refund for some taxpayers while a transition year for 1099K reporting, improved green vehicle credits, and continued expansion of eligibility for the Premium Tax Credit could offer relief for others.
- Reduced tax credits and deductions may result in lower refunds for many taxpayers this year.
- Expanded energy-related credits, the imposition of a transition year for 1099K reporting, and expanded eligibility for the Premium Tax Credit may offer relief for others.
- The end of COVID emergency relief actions is to blame for many smaller refunds.
- The passage of the Inflation Reduction Act of 2022 is giving taxpayers improved energy credits.
- The tax filing deadline for most people is April 18, with extensions for storm victims in some states.
The return of certain tax credits, including the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit, to 2019 levels following the expiration of certain COVID-related American Rescue Plan benefits may result in a smaller refund.
- Instead of the $3,600 per dependent you received in 2021 for the CTC, you'll get $2,000 for the 2022 tax year, if eligible;
- For the EITC, your credit will drop from $1,500 in 2021 to $500 for 2022; and
- The Child and Dependent Care Credit has returned to a maximum of $2,100 in 2022 instead of the $8,000 you received in 2021.
The end of the COVID emergency also spells the end of the up to $600 above-the-line charitable donation tax deduction for tax year 2022. Also gone, is the Recovery Rebate Credit since no rebates were issued in 2022.
Under the Inflation Reduction Act of 2022, if you bought a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a clean vehicle tax credit of up to $7,500. The credit is nonrefundable, meaning you can't get back a larger credit than you owe in taxes. Other Inflation Reduction Act energy credits and changes include an extension of the credit for the installation of an electric vehicle charger to 2033 and more. Details are available on the IRS website.
Reporting rule changes for Form 1099-K, used to report transactions made using a third-party payment network such as Venmo or Paypal, were temporarily halted in 2022 but reinstated in 2023. This means the reporting threshold for 2022 did not drop to $600 as planned and, instead, stayed at 200 transactions and $20,000. The IRS emphasized that all income over $400 should still be reported. You just won't receive a 1099K for any amount under $20,000 for 2022.
If you do receive a 1099K that is not correct, you should contact the payer immediately. The IRS cannot correct the form.
Previously, to be eligible for the Premium Tax Credit, you were required to have income under 400% of the Federal Poverty Level. Under the American Rescue Plan, those with income above 400% of the Federal Poverty Level were eligible for the Premium Tax Credit for 2021 and 2022 only. Passage of the Inflation Reduction Act of 2022 resulted in the continuation of that eligibility.
Finally, storm and disaster victims in several states have had their tax filing deadline pushed to May 15, July 31, and, in some instances, to October 16, depending on the state. Check the IRS disaster relief page for details.