Many of the tax benefits generated by the pandemic are resetting back to 2019 levels. Here are a few examples:
- Charitable contributions can only be claimed if you are itemizing deductions on Schedule A this year. For the last two years, taxpayers could claim up to $300 per person in above-the-line deductions to charity while also taking the standard deduction.
- The child tax credit has returned to the normal amount of $2,000 per child or dependent under 17 years of age.
- The childcare and dependent tax credit has reverted to the values it used in 2020. The maximum credit available this year for one qualifying child is $1,050. Parents with two or more qualifying children can get up to $2,100 credit. The income threshold to receive a full credit in 2022 has dropped dramatically to $15,000 or less – much lower than the $125,000 threshold of 2021. Families with incomes below $438,000 will be eligible for a partial credit.
- There is no recovery rebate credit in 2022 since there were no stimulus checks issued.
It’s not all bad news for taxpayers in 2022. Inflation indexed thresholds have increased tax brackets, standard deductions, retirement contributions, and other benefits.
- Qualified educators who spend their own money for school supplies can deduct up to $300 in 2022 (up from $250 in ’21)
- Foreign earned income exclusion increased to $112,000.
- Nanny tax threshold went up by $100 to $2400 annually.
- Standard mileage rates increased mid-year from 58.5 cents per mile to 62.5 cents per mile.