If youve been looking forward to a big tax refund for 2022, you might want to adjust your expectations.
The expiration of tax breaks that were in place during the early days of the pandemic will result in smaller refunds for many taxpayers and payments due for others. Exactly how much the difference will be depends, somewhat, on the size of your family and where you live. But several changes to the tax code could impact the amount you owe.
For instance, if youre in one of the more than a dozen states that offered rebates or refunds last year, those checks could count as taxable income on your federal returns, even if you dont have to pay a state tax on them. And if you opted to take your stimulus checks from 2021 as a recovery rebate credit, youll be looking at an extra $1,400 per person on your taxes this year.
Meanwhile, the child tax credit will return to its normal rate this year after a big boost for the 2021 tax year. The enhanced rate boosted the credit to as much as $3,600 per child, depending on their age. This year, it reverts to $2,000 per kid under 18. For families with two children under six, that works out to a $3,200 reduction in credits. Similarly, the tax credit for child and dependent care expenses has dropped back to $2,100 this year from its pandemic high of $8,000.
Refunds may be smaller in 2023, the IRS said bluntly in a statement last November. Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, taxpayers who dont itemize and take the standard deduction, wont be able to deduct their charitable contributions.
Also, been doing gig work? Youre on the hook more than ever to report it now, after a bit of a reprieve last year.
Last years American Rescue Plan Act adjusted reporting thresholds, which are returning to normal. Before last year, a Form 1099-K was issued for third-party payments only if the amount of transactions exceeded $20,000. Now, though, the trigger amount is just $600.
Unemployment income will also be taxable once again, unlike in 2020.
Last year, the average individual income tax refund was $3,039. That was a 7.5% increase from the 2020 tax-filing year, when the average refund was $2,827.
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