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How To Get Tax Relief In 2022
Everyone is looking for ways to spend less money and the same is true when it comes to taxes. Although for most people their taxes were already taken out from their wages, there are several ways to get some, or maybe all, of that money back and into your pocket.
Everyone is looking for ways to spend less money and the same is true when it comes to taxes. Although for most people their taxes were already taken out from their wages, there are several ways to get some, or maybe all, of that money back and into your pocket.
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There are two main ways that people can get some relief from their tax burden. The first is through tax deductions, where certain expenses (such as mortgage interest) are deducted from your gross earnings. However, most tax deductions are only available if you itemize your expenses – which most taxpayers don’t do. The second way is through what is called a tax credit. These tax credits are actual “payments” to you, applying directly to any tax amount due. Better yet, many of these tax credits can yield money in your pocket – if the credit exceeds your tax due amount.
There are five new ways to get tax relief in 2022, four of them being tax credits and one is a new allowed deduction, as listed below.
There are two main ways that people can get some relief from their tax burden. The first is through tax deductions, where certain expenses (such as mortgage interest) are deducted from your gross earnings. However, most tax deductions are only available if you itemize your expenses – which most taxpayers don’t do. The second way is through what is called a tax credit. These tax credits are actual “payments” to you, applying directly to any tax amount due. Better yet, many of these tax credits can yield money in your pocket – if the credit exceeds your tax due amount.
There are five new ways to get tax relief in 2022, four of them being tax credits and one is a new allowed deduction, as listed below.
Increased Child and Dependent Care Tax Credit
You are eligible for this tax credit if you were working or going to school full time and paying for the care of a child under 13, or another family member who is not mentally or physically able to care for themselves. The amount of the credit is a percentage of the qualifying expenses you paid – which this year is 50%, up from the previous 35%, although that percentage is reduced for those making more than $125,000.
What kind of relief can this credit give you? – It can reduce your tax bill — or increase your refund — by up to $4,000 for one dependent or $8,000 for two or more. Prior to 2021, the credit would only have done so by $1,050 or $2,100.
Child Tax Credit Expansion
The amount of this credit has been increased to $3,000 per child ages 6 through 17, and $3,600 per child ages 5 and under. The big news is that the credit is fully refundable for tax year 2021, meaning you can receive a cash payment of even the maximum amount of the credit if it exceeds your federal income tax liability for the year or owe no taxes at all.
However, the IRS made advanced monthly payments on this credit, from July through December 2021 as part of the COVID relief program. So, you may have received more than what was due to you based on your tax return figures – which can cut the credit due. But, people earning less than $40,000 annually ($60,000 if married) get full protection of this tax credit.
Economic Impact Payments Rebate Credit
The IRS has sent out three rounds of Economic Impact Payments to eligible Americans, the last of which went out in 2021. Per the IRS, individuals who didn’t qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 recovery rebate credit based on their 2021 tax year information. Also, if you got your stimulus payments but your 2021 income would have disqualified you, you do not need to repay the third stimulus payment.
Earned Income Tax Credit Expansion
The government’s American Rescue Plan has nearly tripled the maximum credit available to $1,502 for tax filers with no children. This tax credit is now available to workers 19 years old and over who have no children, and workers 65 years old and over with no children. To be eligible, your earned income for 2021 must be below $21,430 ($27,380 if married filing jointly). You are also allowed up to $10,000 investment income and still be eligible.
For those who do have qualifying children, if they earn $57,414 or less, they may qualify for the EITC. Depending how many kids they have, they could get a maximum credit of $6,728.
Special Charitable Tax Deduction
Usually, only tax filers who itemize their deductions can deduct the charitable contributions they make. But the IRS is allowing those who take the standard deduction – which is the majority of tax filers – to deduct up to $300 in cash contributions to qualifying charities. Married couples filing jointly may deduct up to $600.
