Tax season is here! Here are some updates you should be aware of as you start preparing to file your taxes for 2022. We want you to be fully aware of all the changes before you begin the process.
The rules are tighter this year, and the IRS has informed taxpayers that the refunds are likely to be smaller. In addition, the agency has shared some returns may require extra review time.
Tax Credit Levels Lowering
The levels are to be similar to those from 2019. There have been changes to the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit.
- For the CTC (under age 17) those who got $3,600 per dependent in 2021, if eligible, get $2,000 for the 2022 tax year. The CTC is partially refundable up to $1,500. Taxpayers won’t receive full credit if it’s larger than what is owed.
- For the EITC (no children) who received roughly $1,500 in 2021 will now get $560 in 2022.
- The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Charitable Donation Tax Deduction Limitation
There now is a limitation to the amount you can claim in charitable taxes unlike during COVID where joint filing taxpayers could take up to a $600 charitable donation tax deduction on their tax returns.
Charitable contributions for taxpayers filing 2022 tax returns must be itemized using the Schedule A form to get a deduction.
Expiration On Mortage Insurance Premium Deductions
Section 419 of the Tax Relief and Health Care Act of 2006 which in the past was extended annually was not renewed for the 2022 tax year. Homeowners can no longer deduct their mortgage insurance premiums on their itemized taxes.
Increased Credit For Clean Vehicles And Solar Energy Products
The Inflation Reduction Act of 2022 increased the Residential Clean Energy Credit. There currently is not a cap for income or credit limitations. Also, you can subtract 30% of all installation costs for solar heating and solar electricity along with other solar products for the home. The principal residence restriction has been removed. Homeowners who installed products on second or vacation homes are also eligible for the credit.
Consumers who purchased new electric vehicles are eligible for the Qualifies Plug-in Electric Drive Motor Vehicle Credit. The maximum credit is $7,500 depending on the battery capacity. You can only qualify for the credit on the tax return if the dealership did not take the credit at the time of the purchase.
At Bridgelight Financial Advisors we make it one of our top priorities to ensure our clients are in love with every aspect of their retirement. If you are in need of a financial advisor that specializes in helping you make your retirement a successful one, our team at Bridgelight Financial Advisors would love to help you experience confidence in every aspect of your financial plan. Call (203) 795-7080, email Advice@BridgelightAdvisors.com, or schedule an appointment online to meet and get started.
About Bill
Bill Leavitt is the president of Bridgelight Financial Advisors, an independent, privately owned fiduciary financial advisory and financial planning firm. He specializes in working with pre-retirees, retirees, professionals, and women investors, helping them navigate a complicated and ever-changing investment landscape. With over 25 years of experience, Bill serves his clients using his own unique financial planning model, The Wealth Focus™ Process, where he helps clients develop their customized long-term wealth strategy in four comprehensive steps. A Connecticut native, Bill resides in southern Connecticut with his wife, Laura, and their three daughters. To learn more about Bill, connect with him on LinkedIn.