It’s time to file your taxes again! Things have slowly been returning to normal since the height of the Covid-19 pandemic, and the same can be said for your taxes, as many of the benefits and exceptions put in place are going away.

Taxpayers may not see a refund this year or may even owe as many of the individual tax credits and deductions are changing. Some of the most important to keep in mind are the following:

• The Child Tax Credit is decreasing. In 2021, the American Rescue Plan made the Child Tax Credit completely refundable and increased it significantly. It went from $2,000 per child to $3,600 (children up to age 6) and $3,600 (children between 7 and 17). In 2022, the Child Tax Credit returns to $2,000 and is no longer refundable. It’s also once again limited to children under 16.
• The Earned Income Tax Credit is decreasing for people without children. For these people, the Earned Income Tax Credit was $1,502 in 2021; in 2022, it is dropping to $560. As for people with children, their credit is increasing slightly to help counter inflation.
• The Child and Dependent Care Credit is decreasing. This year, you can still receive credit for your expenses if you pay for someone’s care so that you can work, but the cap has dropped significantly. In 2021, this credit had a maximum of $8,000; in 2022, it’s only $2,100.
• Charitable deductions are decreasing. During the pandemic, people could take the standard deduction and claim additional charitable donations of up to $300 for single filers and $600 for couples filing jointly. For 2022, this is going away.
• Clean Vehicle Credit rules are changing. As part of the Inflation Reduction Act of 2021, new electric vehicles purchased after August 16, 2022, must have been assembled in North America to receive the $7,500 tax credit.
• Changes for 1099-K forms are coming. There’s been a lot of talk about changes in reporting requirements for third-party organizations like Venmo, PayPal, and Cash App. Before 2022, these companies only had to supply a 1099-K for people who received $20,000 or more in payments and processed at least 200 transactions. The new law removed the requirement for 200 transactions and requires a 1099-K for anyone who receives at least $600 for goods and services. This was set to go into effect for 2022, but the IRS delayed it until 2023.
• In addition to these changes, the IRS has increased its workforce significantly, adding nearly 90,000 more agents. What does this mean for you? Audits are more likely, so it’s crucial to understand these changes when filing your taxes for 2022.

Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.