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Wondering what’s changed in the tax world from last year? We put together the top six 2022 federal tax changes that taxpayers like you should know about before filing your income tax return in 2023. Tax year 2021 saw major tax changes due to the coronavirus pandemic, but many of those changes went away in 2022. Let’s look at the main events and how they might impact your tax refund this year. 1. Temporary Child Tax Credit increase from last year has expiredThe Child Tax Credit (CTC) saw some enhancements last year, including half the credit amount paid to parents in advance monthly payments and an increase to the credit amount itself. These changes were temporary and have not been extended through tax year 2022. Take a look at the table below to compare last year’s enhanced CTC with this year’s.
2. Changes to the Earned Income CreditThe Earned Income Tax Credit (EITC) saw several critical changes in 2021 that no longer apply in 2022. The amount you receive depends on your income level, filing status, and the number of children you have. Working childless adults can still qualify for this credit, but the age requirement and credit amounts have changed. Have a look at the table below to compare this year’s EITC requirements to last year’s.
For more detailed information about the EITC and to estimate how much you can claim this tax year, check out our Earned Income Tax Credit calculator. 3. Other COVID-19 tax enhancements
4. More people will be receiving Form 1099-KIf you sell items online (Facebook Marketplace, eBay, Etsy, etc.) or use third-party payment apps like Venmo, PayPal, or Square, you may receive a new tax form this year — Form 1099-K. This form records transactions from credit cards and third-party payment networks. Once you hit a certain transaction threshold, you’ll receive a 1099-K from the company (Venmo, Square, etc.). Previously, you had to have made at least 200 transactions totaling at least $20,000 to receive a 1099-K. However, that threshold has dropped for 2022 — now you’ll receive a 1099-K if you made at least $600 in payment transactions through these third-party apps. There’s also no transaction limit, so you’ll receive a 1099-K even if you only received one payment totaling at least $600. Please know that this does not necessarily mean you’ll be paying taxes on every transaction recorded on your 1099-K. You’ll only need to pay taxes on any profits you make. For instance, if you bought an item for $150 and then sold it in 2022 for $200, you’d need to report the $50 profit you made. This kind of income has always been taxable income, but not many people have reported all their taxable transactions, which is what brought about this change. If you have more questions, check out Why Did I Receive a 1099-K?. 4. Changes to tax bracket income rangesThe income tax rates did not change for 2022, but the income ranges widened slightly due to inflation adjustments. Here are the tax brackets for 2022:
5. Standard deduction increaseThe Internal Revenue Service (IRS) also increased the standard deduction amount for 2022. The standard deduction is an automatic deduction all filers can take (unless you choose to take itemized deductions). Here are the new 2022 standard deduction amounts:
For more information on all of the 2022 tax adjustments due to inflation, you can check out the IRS’s detailed article about it. 6. Retirement account and health savings account contribution limitsThe IRS also announced changes for tax-advantaged accounts such as retirement plans and health savings accounts (HSAs) this year. If you have a 401(k), you can contribute up to $20,500 for 2022, a $1,000 increase from last year. Those with an HSA can also contribute more this year. The annual contribution limit for individuals increased to $3,650 for 2022 ($50 increase). If you have a family plan, the annual contribution limit is now $7,300 ($100 increase). Other notable changesSome other changes to keep in mind include the following:
What HASN’T changed for 2022?Sometimes it’s also helpful to review what tax laws have stayed the same compared to last year, so we’ve covered a few topics you might be wondering about.
Keep tax changes for the 2022 tax year in mindDue to the pandemic, the 2021 tax code changed in many ways. Most COVID-related enhancements have expired for 2022, and several tax breaks from last year no longer apply. Not to mention, we’ve seen a significant jump in inflation this year, which led to additional tax adjustments. Make sure to review this year’s tax changes to avoid unpleasant surprises when filing your federal tax return this season! This article is for informational purposes only and not legal or financial advice.via Freelancers Union Blog https://blog.freelancersunion.org/2022/12/20/top-6-tax-changes-you-should-know-about-for-2022/
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AuthorI have 5+ years experience working as a medical transcriptionist. When I am not working, I enjoy sports like playing basketball or judo. I love making friends and connections. Archives
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