From the desk of James E. George
If you received a nice tax refund last year and are expecting another one this year, you may be in for a big surprise! The income tax laws have changed and many of the tax-saving, refund generating credits have gone away.
Our congress has raised your tax bill without raising the tax rates. You won’t see this in your newspaper or on the nightly news because they did nothing specific to make it happen. By doing nothing however, to extend the recovery rebate credit, the expanded child tax credit or the increased dependent care credit, these tax-saving credits expired. The rules relating to these tax credits reverted back to the pre 2021 rules and rates. Thus, many of you will see much lower refunds than last year even though you did nothing different.
In 2021, if you had a child under age six you were eligible for a $3,600 child tax credit. For 2022 the amount is reduced to $2,000. In 2021, if you had a child under age 18 you could have qualified for a child tax credit of $3,000 per child and any amount over your tax liability was refundable. In 2022, the amount has been reduced to $2,000 per child, plus they must now be under age 17 and a maximum of $1,400 of the credit is refundable. This could result in a big difference in your refund!
The childcare credit has also been significantly reduced for 2022. In 2021, the maximum credit for one child was 50 percent of the first $8,000 of qualified daycare expenses. For more than one child the credit was 50 percent of the first $16,000 of qualified daycare expenses. Any amount over your tax liability was refundable. For 2022 the maximum credit has been reduced to 35 percent of the first $3,000 of daycare expenses for one child, and $6,000 for multiple dependent children. This credit is no longer refundable. For someone with two children in daycare this could make a difference of $5,900!
The Recovery Rebate Credit has also expired. For many of you this resulted in an additional refund amount of $1,400 for an individual and $2,800 for a couple filing jointly. For 2022 the credit is zero as it no longer exists.
There are many other taxpayer unfriendly changes for 2022. You won’t see or hear about them on the news or the radio, but you may feel the effects of them when you file your 2022 income tax returns.
