2022 Tax Expectations

The 2023 filing season has yet to begin, but I have already tempered the expectations of a number of clients during the year-end planning process. Many will see an increase in their total tax owed as the favorable pandemic relief credits and deductions from 2021 will not apply to the 2022 tax year. Although we have known about these adjustments for some time, if you are not aware of the changes, it could lead to a surprise when filing your 2022 return.

To better prepare yourself, here is a list of things that may affect your return: 

• There were no stimulus payments in 2022. Many taxpayers did not receive the initial stimulus payment when issued and were able to take a $1,400 credit (per person) on their 2021 return

• There is no deduction for charitable contributions if you take the standard deduction. The IRS allowed up to $300 per person ($600 per household) in 2021

• The Child Tax Credit was lowered from $3,000/$3,600 per child in 2021 (fully refundable) to $2,000 per child in 2022 (only $1,500 is refundable)

• The Dependent Care Credit, which could result in an $8,000 credit (per household) in 2021, dropped back to $2,100 (per household) in 2022

If any of these may affect you, it could be a good idea to put together a quick estimate of your income and total tax owed so there are less surprises when you file in 2023.