Changes to Your 2022 Tax Filing That You Should Know About - Brink's Money
Changes to Your 2022 Tax Filing That You Should Know About
23 Jun 2022
Note: Netspend is not a tax advisor or CPA. The knowledge in this post is general information and should not replace the advice of a tax professional. For more information, please reach out to a tax professional in your area. Link (https://www.irs.gov/tax-professionals/choosing-a-tax-professional)
Although the tax filing deadline has passed, you may still have your mind on those 2021 tax rules. With the first quarter of 2022 almost gone, it's worth considering the things you should be doing now to avoid surprises next spring. In fact, you may be waiting on a big refund and may have chosen to have your cash put on a Brink's Money Prepaid Mastercard® for easier tracking of your spending.
Here are some of the most notable new tax updates for the 2022 filing year.
Earned Income Credit
The Earned Income Tax Credit (EITC), which is refundable and can boost your refund, has expanded in 2022. The IRS reports that more workers qualify, even those without children — with a maximum credit at almost three times what it was in the past. If you are at least 19 years old, without children and make less than these income thresholds, you may still qualify:
$21,430 (single filers)
$27,380 (spouse of joint filers)
There is no upper age limit, so the credit is now available for retirees. If you're a full-time student under age 24, however, the EITC isn't open to you.
The IRS also allows some taxpayers to use their 2019 income to get the 2022 EITC. If you made more in 2019, this could help you get a larger EITC, which could mean a bigger tax-time refund. See irs.gov for the instructions and more information.
Looking forward, if you have access to a 401(k), we have good news for you! In 2022, you could make an extra $1,000 in contributions. This makes the new contribution limit $20,500 for the 2022 and a great way for those who can to put more toward their nest egg.
That's not the only adjustment for savers. Those using a Health Savings Account (HSA) to accrue tax-free money for medical expenses can save $150 more than in 2021 — up to $4,950 for individuals. Families can max out $250 more for a total of $7,400. HSA money can be rolled over from year to year.
Child Tax Credits
Those July-to-December monthly Advanced Child Tax Credit payments coming to your bank account each month in 2021 were nice, but they did make filing your 2021 taxes a bit more complicated. They also came with a much bigger credit for the 2021 season. So, what sort of 2022 tax changes will we see?
First, the more generous total credits of 2021 have gone away — for now. Unless legislation happens to make them permanent, we are looking at 2022 child tax credits that looked more like 2020. This includes:
A $2,000 credit for dependents under age 17
Only 70% of the credit is refundable
Not available to those making over $200,000 a year ($400,000 for married couples)
(You could also adjust your paycheck withholding if you expect you'll have a big refund and want to have access to it throughout the year, instead.)
Tax inflation adjustments
If it seems like everything costs more these days, you can thank inflation. Thankfully, the IRS has given a little room for the high price of everything by adjusting certain rates up a bit for the 2022 tax season to account for it. You can see the full details in their new chart.
For example, the standard deduction for a single taxpayer and married individuals filing separately was $12,550, but it will be $12,950 in 2022. Heads of households will see similar increases in their standard deductions.
Tax brackets also changed in 2022. The 10% income bracket for married couples filing jointly, for example, jumps from $19,900 to $20,550. The highest bracket, at 37%, is for individual single taxpayers with incomes greater that $539,000 and for married couples filing jointly, it increased from $628,300 to $647,850. Between the standard deduction and these new bracket numbers, you may see a bit of relief in your tax bill.
Bottom line: Everything changes
We've seen quite a flurry of tax changes over the past few years, starting with the pandemic relief measures in 2020 and including last year's Advanced Child Tax Credit payments. This year, we'll see a more measured response to taxes, although anything can change if a new law is passed. Perhaps the best way to ensure you don't miss anything important is to check in with your tax professional throughout the year or sign up for the Tax Tips email newsletter from the IRS website.
A quick way to learn about these changes quickly is to scan the consumer-focused IRS press releases do a good job of explaining the more widespread changes and what it means for 2022 tax filings.
Effective tax preparation can help you accomplish your financial goals. Whether you have a goal of saving more for emergencies or want to go back to school, prepaid cards, such as the Brink's Money Prepaid Card, can make it easier to take control of your financial health in every day ways.
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