Top 6 Tax Changes You Should Know About for 2022

Questioning what’s modified within the tax world from final 12 months? We put collectively the highest six 2022 federal tax adjustments that taxpayers like you need to find out about earlier than submitting your earnings tax return in 2023.

Tax 12 months 2021 noticed main tax adjustments as a result of coronavirus pandemic, however a lot of these adjustments went away in 2022. Let’s take a look at the principle occasions and the way they may influence your tax refund this 12 months.

1. Momentary Youngster Tax Credit score improve from final 12 months has expired

The Youngster Tax Credit score (CTC) noticed some enhancements final 12 months, together with half the credit score quantity paid to oldsters prematurely month-to-month funds and a rise to the credit score quantity itself. These adjustments have been non permanent and haven’t been prolonged by way of tax 12 months 2022.

Check out the desk beneath to check final 12 months’s enhanced CTC with this 12 months’s.

Necessities	2021 CTC	2022 CTC
Quantity	As much as $3,600 (relying on age)	$2,000
Dependent’s age	Youngsters ages 5 and youthful qualify for as much as $3,600 Youngsters ages 6-17 qualify for as much as $3,000	Youngsters underneath 17
Revenue thresholds	Further credit score quantity of as much as $1,600 started phasing out at $75,000 for single filers, $112,500 for heads of family, and $150,000 for joint filers Capped at $200,000 ($400,000 for joint filers)	Credit score restricted to underneath $200,000 for single and head-of-household filers or $400,000 for married {couples} submitting collectively

2. Modifications to the Earned Revenue Credit score

The Earned Revenue Tax Credit score (EITC) noticed a number of important adjustments in 2021 that not apply in 2022. The quantity you obtain relies on your earnings stage, submitting standing, and the variety of kids you might have.

Working childless adults can nonetheless qualify for this credit score, however the age requirement and credit score quantities have modified. Take a look on the desk beneath to check this 12 months’s EITC necessities to final 12 months’s.

Necessities	2021 EITC	2022 EITC
Most credit score quantities	$1,520-$6,728	$560-$6,935
Age restrict for childless staff	Ages 19+	Ages 25-64 (nonetheless pending IRS affirmation)
Refundable?	Sure	Sure
Most earned earnings quantity (for joint filers with 3+ children)	$57,414	$59,187

For extra detailed details about the EITC and to estimate how a lot you possibly can declare this tax 12 months, take a look at our Earned Revenue Tax Credit score calculator.

3. Different COVID-19 tax enhancements

Youngster and Dependent Care Credit score: This credit score is not refundable in 2022, and the utmost credit score share dropped to 35 % (down from 50 % final 12 months). You possibly can declare as much as $3,000 in bills for one youngster underneath 13 and as much as $6,000 for 2 or extra kids underneath 13.
Restoration Rebate Credit score: There have been no further stimulus checks for 2022, which means the Restoration Rebate Credit score will not be out there this tax 12 months.

4. Extra individuals can be receiving Kind 1099-Ok

In the event you promote gadgets on-line (Fb Market, eBay, Etsy, and so forth.) or use third-party fee apps like Venmo, PayPal, or Sq., chances are you’ll obtain a brand new tax type this 12 months — Kind 1099-Ok.

This manner information transactions from bank cards and third-party fee networks. When you hit a sure transaction threshold, you’ll obtain a 1099-Ok from the corporate (Venmo, Sq., and so forth.).

Beforehand, you needed to have made no less than 200 transactions totaling no less than $20,000 to obtain a 1099-Ok. Nonetheless, that threshold has dropped for 2022 — now you’ll obtain a 1099-Ok when you made no less than $600 in fee transactions by way of these third-party apps. There’s additionally no transaction restrict, so that you’ll obtain a 1099-Ok even when you solely acquired one fee totaling no less than $600.

Please know that this doesn’t essentially imply you’ll be paying taxes on each transaction recorded in your 1099-Ok. You’ll solely have to pay taxes on any earnings you make. For example, when you purchased an merchandise for $150 after which offered it in 2022 for $200, you’d have to report the $50 revenue you made.

This type of earnings has at all times been taxable earnings, however not many individuals have reported all their taxable transactions, which is what caused this alteration.

When you have extra questions, take a look at Why Did I Obtain a 1099-Ok?.

4. Modifications to tax bracket earnings ranges

The earnings tax charges didn’t change for 2022, however the earnings ranges widened barely because of inflation changes.

Listed here are the tax brackets for 2022:

Tax fee	Single filer	Joint filers	Married submitting individually	Head of family
10%	$0 to $10,275	$0 to $20,550	$0 to $10,275	$0 to $14,650
12%	$10,276 to $41,775	$20,551 to $83,550	$10,276 to $41,775	$14,651 to $55,900
22%	$41,776 to $89,075	$83,551 to $178,150	$41,776 to $89,075	$55,901 to $89,050
24%	$89,076 to $170,050	$178,151 to $340,100	$89,076 to $170,050	$89,051 to $170,050
32%	$170,051 to $215,950	$340,101 to $431,900	$170,051 to $215,950	$170,051 to $215,950
35%	$215,951 to $539,900	$431,901 to $647,850	$215,951 to $323,925	$215,951 to $539,900
37%	$539,901 or extra	$647,851 or extra	$323,926 or extra	$539,901 or extra

5. Customary deduction improve

The Inside Income Service (IRS) additionally elevated the usual deduction quantity for 2022. The usual deduction is an computerized deduction all filers can take (except you select to take itemized deductions).

Listed here are the brand new 2022 commonplace deduction quantities:

Married submitting collectively: $25,900 ($800 improve)
Single and married submitting individually: $12,950 ($400 improve)
Head-of-household filers: $19,400 ($600 improve)

For extra data on the entire 2022 tax changes because of inflation, you possibly can take a look at the IRS’s detailed article about it.

6. Retirement account and well being financial savings account contribution limits

The IRS additionally introduced adjustments for tax-advantaged accounts comparable to retirement plans and well being financial savings accounts (HSAs) this 12 months.

When you have a 401(ok), you possibly can contribute as much as $20,500 for 2022, a $1,000 improve from final 12 months.

These with an HSA also can contribute extra this 12 months. The annual contribution restrict for people elevated to $3,650 for 2022 ($50 improve). When you have a household plan, the annual contribution restrict is now $7,300 ($100 improve).

Different notable adjustments

Another adjustments to bear in mind embody the next:

Bona fide residents of Puerto Rico are not required to have three or extra qualifying kids to be eligible to assert the Further Youngster Tax Credit score (ACTC). As a substitute, chances are you’ll be eligible to assert the ACTC in case you are a Puerto Rican resident and have a number of qualifying kids.
The present tax exclusion for 2022 has elevated to $16,000.
The month-to-month restrict for certified transportation fringe advantages is now $280.

What HASN’T modified for 2022?

Generally it’s additionally useful to assessment what tax legal guidelines have stayed the identical in comparison with final 12 months, so we’ve coated a number of subjects you is likely to be questioning about.

There may be nonetheless no restrict on itemized deductions you possibly can declare for 2022.
Marginal earnings tax charges didn’t change.
The Medical Expense Deduction threshold for these with excessive medical prices stays at 7.5 % of your adjusted gross earnings (AGI) — which means in case your medical payments whole greater than 7.5 % of your AGI, you possibly can deduct the surplus when you itemize your deductions.
Lengthy-term capital beneficial properties tax charges stay the identical at 0, 15, and 20 % relying in your earnings.

Preserve tax adjustments for the 2022 tax 12 months in thoughts

As a result of pandemic, the 2021 tax code modified in some ways. Most COVID-related enhancements have expired for 2022, and several other tax breaks from final 12 months not apply. To not point out, we’ve seen a big bounce in inflation this 12 months, which led to further tax changes.

Make sure that to assessment this 12 months’s tax adjustments to keep away from disagreeable surprises when submitting your federal tax return this season!