Tax

This typically changes every year, and the amounts are generally minimal. 2022 was no different. The standard deduction amounts were increased slightly for 2022 to account for inflation in 2021. Married couples get $25,900 plus $1,400 for each spouse age 65 or older. Singles can claim a $12,950 standard deduction — $14,350 if they're at least 65 years old. Head-of-household filers get $19,400 for their standard deduction plus an additional $1,750 once they reach age 65. The tax brackets were widened by a few hundred to a few thousand.

For 2022, they are:

Major changes were made to the child tax credit for 2021 – but they were only temporary. The child tax credit reverts back to its pre-2021 form for the 2022 tax year. That means the 2022 credit amount drops back down to $2,000 per child (it was $3,000 for children 6 to 17 years of age and $3,600 for children 5 years old and younger for the 2021 tax year). Children who are 17 years old don't qualify for the credit this year, because the former age limit (16 years old) returns. For some lower-income taxpayers, the 2022 credit is only partially refundable (up to $1,500 per qualifying child), and they must have earned income of at least $2,500 to take advantage of the credit.

Significant improvements were made to the child and dependent care credit for 2021. But, again, the changes only applied for one year.

For 2022, the child and dependent care credit is non-refundable. The maximum credit percentage also drops from 50% to 35%, and fewer care expenses are eligible. For 2022, the credit is only allowed for up to $3,000 in expenses for one child/dependent and $6,000 for more than one. When the 35% maximum credit percentage is applied, that puts the top credit for the 2022 tax year at $1,050 (35% of $3,000) if you have just one child/dependent in your family and $2,100 (35% of $6,000) if you have more. In addition, the full child and dependent care credit will only be allowed for families making less than $15,000 a year in 2022 (instead of $125,000 per year). After that, the credit starts to phase-out.

More workers without qualifying children were able to claim the earned income tax credit (EITC) on their 2021 tax return, including both younger and older Americans. The "childless EITC" amounts were higher, too. However, once again, those enhancements have expired.                      

Without the 2021 improvements in place, this credit now will only apply if you are between 25 and 65 years of age. The maximum credit available for childless workers plummets from $1,502 to $560 for the 2022 tax year. Expanded eligibility rules for former foster youth and homeless youth that applied for 2021 are dropped as well. In addition, the rule allowing you to use your 2019 earned income to calculate your EITC if it boosted your credit amount no longer applies.

For 2022, all unemployment compensation is again taxable.

Fewer filers may be able to claim charitable donation tax breaks for this tax year. The expanded charitable cash contribution benefits that were offered in 2020 and 2021 have ended. The temporary suspension of the 60% AGI limit in 2020 and 2021 is now back, limiting the amount you can claim in charitable contributions.

While not technically new, for 2022 the IRS is making a more concerted effort to track cryptocurrency sales and trades. Whenever you sell or trade your crypto or purchase an item with crypto, you trigger a taxable event. Currently, crypto is taxed like property, making it subject to short-term or long-term capital gains. This also means you can report any crypto losses to help offset any gains. Since 2022 saw a drastic drop in the value of cryptocurrencies, if you sold or traded your crypto at a loss, you may be able to reduce your tax bill by reporting your capital loss.

Though widespread federal student loan relief remains on hold, you may have received student loan forgiveness through the Public Service Loan Forgiveness program or another similar endeavor. If you had any balances forgiven in 2022, you won't owe federal taxes on the canceled amount; however, there are a handful of states where forgiven loan balances may be taxed. Indiana, Minnesota, Mississippi and North Carolina have confirmed they will tax any student loan debt relief on your 2022 taxes.

There are far too many other changes to cover. Be assured that your tax professionals at Sloan know the rules and are here help you navigate the changes.  We are open year-round and we are happy to assist in preparing for the upcoming season. Plus, our tax professionals are here full time to ensure you get the best service possible and the support you need - when you need it. 

Sources: irs.gov, kiplenger.com, cnbc.com