Here’s Why Your Tax Refund Might Be Less This Year
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If you are counting on a tax refund, it may be “somewhat lower” than last year. IRS.
Generally, you can qualify for a federal refund if you overpay your annual taxes or withhold more than you owe. Experts say one big reason for the smaller payout this year is the expiration of the pandemic relief that was provided through the 2021 tax break.
Meanwhile, many Americans are still struggling financially, with nearly a third of them relying on tax refunds to make ends meet, a recent Credit Karma poll showed.
Joe Boormann, Certified Financial Planner and Senior Financial Planner at eMoney Advisor, said lower refunds and high inflation could be a “double whammy” for some families.
According to the data, the average refund for the 2022 application season was $3,176 as of October 28, up almost 14% from $2,791 in 2021. IRS.
Why Your 2022 Tax Refund Might Be Less
There are several reasons why some tax filers may face “an unpleasant surprise” when filing their tax returns this year, Burmann said.
Thanks to the American Plan of Rescue 2021, many families have received support through expanded a child tax credit of up to $3,600 per child; and a child and dependent care tax credit of up to $4,000 per dependent.
But these tax breaks are back on track. For 2022, the child tax credit has dropped again to a maximum of $2,000 per child, and the child and dependent care tax credit has returned to $1,050 per dependent. “This is refund money right here,” Burmann said.
According to him, if you did not receive the third stimulus payment, you had the opportunity to claim it when returning in 2021, additionally reimbursing the costs.
Another pandemic era change was a more generous charity deduction in 2021, allowing claimants to receive tax credits even if they did not itemize the deductions.
The deduction – $300 for single applicants or $600 for married couples filing jointly – was a “significant amount” for many Americans, said Tony Molina, a Wealthfront certified public accountant.
How to increase the refund or reduce the account
Although there are not many ways Whether you increase your refund or cut your bill by the April 18 tax deadline, Molina said, you still may have a few options.
“One simple thing: you can still contribute to the traditional [individual retirement account]“And let it be taken into account for last year,” he said, that he could offer a tax deduction. Your eligibility for tax benefits depends on your income and participation in a retirement plan in the workplace.
There’s also still time for contributions to the 2022 Health Savings Account, which also offers a deduction if you have an eligible high-deductible health plan.
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