Although you can't officially file your federal tax returns until the last week in January, now's a great time to get organized for tax season. Many of the pandemic tax benefits from the past few years, like the expanded child tax credit, temporary expansions to the child and dependent care credit and federal stimulus payments, ended at the end of 2021, which could mean your refund will be a little smaller this year or you may find yourself owing tax this year.
Personal Tax Changes That Took Effect in 2022
Child Tax Credit. It has dropped back down to its pre-pandemic amount, $2,000 per child or dependent, and is now only available for children under 17 years of age. The credit, which was fully refundable last year, is now only partially refundable up to $1,500 to some lower-income parents, and advance payments are no longer in effect.
Other Dependents Credit. The Credit for Other Dependents is worth up to $500. The IRS defines a dependent as a qualifying child (under age 19 or under 24 if a full-time student, or any age if permanently and totally disabled) or a qualifying relative.
Earned Income Tax Credit (EITC). In 2022, the maximum earned income credit for people without children is up to $560; up to $3,733 for people with one qualifying child; up to $6,164 for people with two qualifying children; and up to $6,935 for people with 3 or more qualifying children, still, depending on their adjusted gross income.
Child and Dependent Care Assistance. It’s meant to cover a percentage of day care and similar costs for a child under 13, a spouse or parent unable to care for themselves, or another dependent so you can work. Generally, it's up to 35% of $3,000 of expenses for one dependent, for a maximum amount of $1,050, or $6,000 for two or more dependents, for a maximum amount of $2,100.
Electric Vehicle Credit. Through the end of 2022, the qualified plug-in electric drive motor vehicle credit is still available but it's not refundable, meaning buyers need to have a federal tax liability to get full or partial benefits. It applies to qualifying new electric and plug-in hybrid passenger vehicles and light trucks. The credit is equal to $2,500 plus $417 for every kilowatt hour of battery capacity in excess of four kilowatt hours—up to $7,500 in total credits. Vehicles purchased after August 16, 2022, only qualify for the credit if they underwent final assembly in North America. Furthermore, manufacturers that have sold more than 200,000 qualifying vehicles, including Toyota and Tesla, won't be eligible for this tax credit until 2023.
Residential Energy Property Credit through 2019 was worth up to 30% of qualifying expenditures. The credit’s rate was reduced to 26% through 2022 and 22% in 2023, expiring after 2023. The IRA restored the 30% credit for the 2022 tax year and made battery storage technology placed in service in 2023 or later eligible.
Federal Solar Tax Credit is 30% of the cost of a solar PV system paid for by the taxpayer. The installation of the system must be complete during the tax year. It will decrease to 26% for systems installed in 2033 and to 22% for systems installed in 2034. The tax credit expires starting in 2035 unless Congress renews it. There is no maximum amount that can be claimed.
Required Minimum Distribution (RMD) must be made for 2022. A taxpayer who is at least 72 years old by the end of 2022 is required to take a RMD. Failure to take the RMD can cause a penalty of 50% on the amount not distributed. ROTH IRAs do not require withdrawals until after the death of the owner.
The maximum contribution to a 401(k) in 2022 is $20,500, or $27,000 for people over 50. ROTH and traditional IRA contributions are up to $6,000 and up to $7,000 for people over 50. Eligibility, and whether your contribution is deductible, will depend on your income level and whether or not you have a retirement plan at work. There is no age limit on making regular contributions to traditional or ROTH IRAs. Coronavirus-related withdrawals from IRAs, pension plan, or 401(k) plan during 2020 can be re-contributed back into a qualified retirement plan at any time during the following three-year period to eliminate otherwise reportable taxable income.
The AGI limit to qualify for the the Retirement Savings Contributions Savers Credit in 2022 is $34,000 for single filers and married individuals filing separately, $51,000 for heads of household, and $68,000 for married couples filing jointly. Also, an eligible individual should be 18 or older, not a full-time student, not claimed as a dependent on another person's tax return, and make contributions to a retirement plan or IRA.
2022 Health Savings Account (HSA) contribution limits for an individual with coverage under a qualifying high-deductible health plan (deductible not less than $1,400) are up to $3,650. The maximum out-of-pocket has been increased to $7,050. An individual with family coverage under a qualifying high-deductible health plan (deductible not less than $2,800) can contribute up to $7,300. The maximum out-of-pocket is $14,100. People who are age 55 or older can contribute an additional catch-up contribution of $1,000 per year.
The annual Gift Tax Exclusion amount for 2022 is up to $16,000 per recipient with no limitation of the number of recipients.
Above-the-Line Charitable Deductions. People who took the standard deduction on their 2020 or 2021 tax return could also claim a tax deduction of up to $300 for cash donations to charity. The $300 deduction wasn't extended past 2021. For 2022 and beyond, the only way to write off gifts to charity is to itemize.
The Educator Expense Deduction allows eligible educators to deduct up to $300 worth of qualified expenses from their income for 2022, which includes books and classroom supplies, technology and computer software used in the classroom, and professional development courses related to teaching that were not reimbursed by school or by another source.
Student Loan Interest Deduction is $2,500 for 2022, based on income eligibility. For single, head of household or a qualifying widow(er) taxpayers the loan interest phase-out starts at $70,000 modified AGI and ends at $85,000. For married couples with income of $145,000 phase-out begins and ends at $175,000.
American Opportunity Tax Credit amount is up to $2,500 per student. The full credit may be claimed by people with modified adjusted gross income (MAGI) of up to $80,000 for single taxpayers and $160,000 for married taxpayers filing jointly.
Lifetime Learning Credit is $2,000, based on $10,000 in qualifying expenses. It phases out for single taxpayers with modified adjusted gross income (MAGI) between $80,000 and $90,000 and between $160,000 and $180,000 of MAGI for joint filers.
Standard Deductions for 2022 tax year:
Filing Status |
Standard Deduction for 2022 Tax Year |
Change from 2021 |
Single |
$12,950 |
+$400 |
Married filing jointly |
$25,900 |
+$800 |
Head of household |
$19,400 |
+$600 |
Married filing separately |
$12,950 |
+$400 |
DATA SOURCE: IRS.
People who are at least 65 years old or blind can claim an additional standard deduction of $1,400 in 2022 ($1,750 if claiming the single or head of household filing status). If both spouses are 65 or older and blind, the additional deduction amount is doubled.
If you can be claimed as a dependent on another person's tax return, your 2022 standard deduction is limited to the greater of $1,150 or your earned income plus $400 (the total can't be more than the basic standard deduction for your filing status).
Long-term capital gains rates are 0%, 15% or 20%, depending on taxable income and filing status. In 2022, the 0% rate applies for individual taxpayers with taxable income up to $41,675 on single returns, $55,800 for head-of-household, and $83,350 for joint returns. The 20% rate for 2022 starts at $459,751 for singles, $488,501 for heads of household and $517,201 for couples filing jointly. The 15% rate is for filers with taxable incomes between the 0% and 20% break points. The 3.8% surtax on net investment income stays the same for 2022. It kicks in for single people with modified AGI over $200,000 and for joint filers with modified AGI over $250,000.
For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly). The other rates are:
Tax Rate on Income |
Single |
Head of Household |
Married Filing Jointly |
Married Filing Separately |
10% |
$0 to $10,275 |
$0 to $14,650 |
$0 to $20,550 |
$0 to $10,275 |
12% |
$10,275 to $41,775 |
$14,650 to $55,900 |
$20,550 to $83,550 |
$10,275 to $41,775 |
22% |
$41,775 to $89,075 |
$55,900 to $89,050 |
$83,550 to $178,150 |
$41,775 to $89,075 |
24% |
$89,075 to 170,050 |
$89,050 to 170,050 |
$178,150 to $340,100 |
$89,075 to 170,050 |
32% |
$170,050 to $215,950 |
$170,050 to $215,950 |
$340,100 to $431,900 |
$170,050 to $215,950 |
35% |
$215,950 to $539,900 |
$215,950 to $539,900 |
$431,900 to $647,850 |
$215,950 to $323,925 |
37% |
$539,900 or more |
$539,900 or more |
$647,850 or more |
$323,925 or more |
DATA SOURCE: IRS.