Your tax refund may be smaller this year. This is why | CNN Business



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Official tax filing season has begun Monday, January 23, and there may be some surprises for your wallet.

So, do you intend to file your 2022 federal income tax return early or wait until the last minute, now is a good time to find out if you owe the IRS, if you might get a refund and if so, how many.

Here’s why: The numbers may be significantly different than last year. Many popular tax breaks have changed since you filed your 2021 return. And your financial situation may have changed, too, if you sold any assets or got laid off.

If it turns out you’ll owe the IRS, and you need time to collect the money, “You can still file and set your payment to go by April 18,” says Kathy Pickering, the chief tax officer at H&R Block. (If you pay after April 18, you may be subject to penalties and interest.)

Most Americans receive a federal tax refund each year, and for many that refund is a big boon to their finances.

But that benefit may be smaller this year, in part because of some tax-paying increases that were implemented last fiscal year.

Child tax credit: For the 2022 tax year, parents can claim the maximum Child tax credit $2,000 for each child up to age 16 if your adjusted gross income is less than $200,000 ($400,000 if filing jointly). Above those levels, the debt starts to decrease. And the portion of the credit that’s considered refundable — meaning it’s paid to you even if you don’t owe any federal income tax — is four. limited to $1,500, and only to those with an income of at least $2,500.

But it is below the now limit the child’s income tax credit it was effective for 2021. Among other things, it was fully reinstated with no income requirement, Pickering said. And the improvement allows parents to make a maximum credit of $3,600 for all children under 6 years old and up to $3,000 for children from 6 to 17 years old.

Child and dependent care credit: The tax credit used by working parents help pay for child support or filers who claim to pay the maintenance of an elderly dependent are also significantly lower for the 2022 tax year. This is because Congress allowed the extension to expire in 2021.

On your return in 2022, for example, you can get up to 35% of up to $3,000 in personal expenses, or up to $6,000 in corporate expenses. two or more. It’s a non-refundable credit, which means you can only claim it if you have a federal tax credit to pay off.

For fiscal year 2021, in contrast, the credit is fully refundable and has a maximum value of 50% on $4,000 in personal expenses. single or up to $16,000 for two or more.

What a difference it makes, Pickering said. This year, if you have one child or dependent, you only owe $1,050 ($2,100 for two or more). By comparison, last year you owed $4,000 (or $8,000 for two or more).

Income Tax Credit for those without children: The EITC, a refundable credit, is a means of financial assistance to low- and moderate-income workers (defined in 2022 as those who earn less than $59,187), especially folders and children.

Of the EITC also available to workers without eligible children. But the maximum credit for someone in this category is only $560 for 2022. That’s almost $1,000 less than the $1,502 they were allowed to claim in 2021 because of a one-year extension. became part of the American Rescue Plan.

Losing love: To qualify for your 2022 deductions, including charitable donations, you need to exceed the standard deduction of $12,950 for single filers or $25,900 for married filers.

Most files are unsorted. This means that any charitable giving they make during the year is not reported on their tax return because it is subject to the standard deduction.

But for the 2020 and 2021 tax years, filers were allowed to take the so-called above-the-line deduction for charitable donations of up to $300 ( $600 if filing jointly) in addition to the standard deduction.

That above-the-line deduction, however, is over.

Payroll: If you were laid off last year and received severance pay, that money will be taxable in 2022. If happens at the end of the year, it may take your income in 2022 to a higher level, just like a big money. -bonus time maybe.

If you receive unemployment benefits, make sure the state is withholding taxes on those payments. If not, then you may have to send the IRS a check, Pickering said.

The 2022 tax year is over, but there may be a few things you can do now to increase the amount the IRS sends you or reduce the amount you will owe.

Review of last year: While most tax breaks are less generous now, review your 2021 return to make sure you bought all the improvements you qualify for, Pickering said.

If you haven’t bought it yet, “file a revision for 2021,” he suggested.

Use your lost funds: If you sold the asset in 2022 at a gain, you will owe on that gain. Unless, that is, you sold other assets at a loss equal to or greater than your gain. It’s yours exchangeable losses your income dollar for dollar. And if you still have losses left over after you do that you can also claim them against $3,000 of your ordinary income for 2022. Any losses beyond that are can be used in future financial years.

If all you did was book a loss this year, you could increase your income by up to $3,000 and carry the rest forward.

These bankruptcy rules also apply to crypto loss.

Make an IRA contribution: You can still make contributions in 2022 to an IRA until April 18, 2023. The annual limit on those contributions is $6,000 ($7,000 if you’re 50 or older).

Your contributions can be deducted if you do them in a traditional IRA. But how much less it depends on two things: Whether you have access to an employer-sponsored plan at work and your modified supplemental income.

To get the full deduction, you or your spouse cannot be covered by a retirement plan at work. Or, if you have access to a workplace plan, you can still take the full deduction if the adjusted AGI is $68,000 or less ($109,000 or less if married filing jointly).

But if you can get a plan and your income is higher, the number is different. You can get a partial deduction if your modified AGI is more than $68,000 but less than $78,000 (more than $109,000 but less than $129,000 if you’re a single filer).

If your income is more than $78,000 (or $129,000), however, you may not take a deduction.

Maximize Your Health Care Contributions: If you have already opened a Health Savings Account in the previous year and are covered by an HSA-eligible health plan, you can still deduct your contributions in 2022 until the due date tax is April 18.

The maximum you can contribute is $3,650 for single coverage, or $7,300 for family coverage. Anyone 55 or older at the end of December can contribute an additional $1,000.

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