If you’ve been expecting a big tax refund for 2022, you might want to adjust your expectations.
Expiration of tax breaks implemented at the start of the pandemic will result in smaller refunds for many taxpayers and payments for others. Exactly how much the difference will depend, somewhat, on the size of your family and where you live. But some changes in the tax code could affect the amount you owe.
For example, if you’re in one of the more than a dozen states that offer rebates or refunds last year, the check can count as taxable income on your federal return, even if you don’t have to pay state taxes. . And if you choose to take your stimulus check starting in 2021 as a recovery rebate credit, you’ll get 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 increased rate increases the credit to $3,600 per child, depending on their age. This year, back to $2,000 per child under 18. For families with two children under six, that can come out for $3,200 red in credits. Additionally, the tax credit for child and dependent care expenses has dropped back to $2,100 this year from a pandemic high of $8,000.
“Refunds may be smaller in 2023,” the IRS said bluntly in a late November statement. “Taxpayers will not receive additional stimulus payments with their 2023 tax returns because there is no Economic Impact Payment for 2022. In addition, taxpayers who do not apply and take the standard deduction will not be able to deduct charitable donations.”
Also, have you done a gig? You’re on the hook more than ever to report now, after a bit of a reprieve last year.
The American Rescue Plan Act last year set the reporting threshold, which is back to normal. Prior to last year, Form 1099-K was issued for third-party payments only if the transaction amount exceeded $20,000. Currently, the trigger amount is only $600.
Unemployment income will also be taxed again, unlike in 2020.
Last year, the average individual income tax refund was $3,039. This is a 7.5% increase from the 2020 tax filing year, when the average refund was $2,827.
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