New Tax Break Rules for 2022 Tax Returns

As tax season looms, it’s time to learn how changes for 2022 may impact your federal income tax return. With certain 2021 tax breaks no longer in effect, make sure you know what rules to use for filing. Our Levy & Associates tax consultants with over two decades of experience list the main points of changing rules for 2022 tax returns.

Earned Income Tax Credit

The EITC (Earned Income Tax Credit) is a tax break benefiting workers with moderate-to-low incomes. Qualifying taxpayers can use this tax break to increase their tax refunds or reduce tax debt. Earned income doesn’t include disability benefits like SSI and Social Security Disability Insurance.

In 2021, taxpayers 19 years or older without children were eligible for EITC. By 2022 rules, childless filers may only qualify for this tax credit if they are between 25 and 65 years old. Also, while filers could use their 2019 income for 2021 Earned Income Credit, you can’t use the previous year’s income to qualify for 2022 ETIC.

Additionally, the maximum EITC amount for taxpayers with three or more children increased to $6,935 (compared to $6,728 in 2021) based on inflation rates.

Child Tax Credit

For the tax year 2022, filers can only claim credit for dependent children under 17 (unlike the 2021 child tax credit, which allowed claiming 17-year-old child dependents).

The maximum credit has dropped to $2,000 per child, compared to $3,600 for children under 6 and $3,000 for children aged 6 to 17 in 2021. Also, filers who don’t owe income taxes may now receive no more than $1,400 with this tax credit, making this credit only partially refundable, while in 2021 filers could collect full credit even without owing income taxes.

On the other hand, the child tax credit now applies to a wider income bracket. Taxpayers may qualify for full credit if they are:

• Married filing a joint return, with combined incomes up to $400,000
• Head of household or single with an income up to $200,000

In contrast, in 2021 filers could collect full credit with incomes of up to $150,000 (married couples filing jointly), $112,500 (heads of household), or $75,000 (singles).

Child and Dependent Care Tax Credit 

For the 2022 tax year, qualifying filers may choose between getting a tax credit of up to 35% for either:

• Child care expenses of up to $3,000 for each child under 13 years of age, or an incapacitated parent or spouse, or
• Collective care expenses of up to $6,000 for multiple dependents (two or more)

Child and dependent care tax credits will decrease in increments for filers with an AGI (Adjusted Gross Income) of $15,000 or higher.

That’s a sharp dip compared to 2021 when the maximum credit amount was 50% on care expenses up to $8,000 for a single qualifying dependent or up to $16,000 for multiple dependents. Also, in 2021, filers could benefit from a full tax credit if their AGI was up to $125,000.

Additionally, in 2022, the status of the child and dependent care tax credit changed from fully refundable to non-refundable. 2022 rules also introduced some restrictions on the type of expenses eligible for this tax credit.

Levy & Associates Tax Consultants: Full-Service Tax and Accounting Solutions

Keeping up with changing tax rules is a challenge for many American taxpayers. To ensure that your tax statement complies with the new tax break rules for 2022 tax returns, contact Levy & Associates. Our tax consultancy can handle all your tax filings, work to resolve your tax disputes, and help you avoid costly penalties.

For efficient and reliable tax solutions, call our Delray Beach, FL, offices at (561) 325-6881 or our Lathrup Village, MI, location at (313) 447-1704.