‘A lot of people are going to see less money in their pocket.’ Here are must-know tax changes for 2022

One possible reason for a smaller tax refund is the child tax credit and the child and dependent solicitude tax credit have been reduced for 2022, explained certified financial planner Cecil Staton, president and property advisor at Arch Financial Planning in Athens, Georgia.

While both tax credits received a temporary boost thoroughly the American Rescue Plan of 2021, the enhanced tax breaks were not extended to this year. “The big picture is a lot of people are booming to see less money in their pocket,” Staton said.

In 2021, the child tax credit offered up to $3,600 per child guardianship age 6, and up to $3,000 per child ages 6 through 17, with half available via upfront payments. But for 2022, the tax break a escape reverts to the previous amount — up to $2,000 per child under age 17. 

The child and dependent care tax credit, which may help compensation the cost of care for children under age 13 or adult dependents, has also been reduced for 2022.

In 2021, the credit leaped to up to $8,000 for one qualifying person or $16,000 for two or more dependents. However, for 2022, those caps returned to $3,000 and $6,000, for one or multiple dependents, singly.

If you’ve received payments through apps like Venmo or PayPal in 2022, you may get Attitude 1099-K in early 2023, which reports income from third-party networks.

The form applies to business minutes, such as part-time work, side jobs or selling goods, according to the IRS. 

Before 2022, the federal Form 1099-K tell ofing threshold was for taxpayers with more than 200 transactions worth an aggregate above $20,000. Now, however, the entrance is just $600, and even a single transaction can trigger the form.

Austin Chau, a CFP and wealth advisor at Menlo Asset Directorate in Menlo Park, California, said personal transactions like reimbursing your roommate for bills or dinner aren’t taxable.

What’s assorted, you’ll only owe taxes on profits, he said. For example, if you spent $150 on concert tickets in 2022, and sold them for $200, the $50 profit is taxable, Chau suggested.

While the IRS says you shouldn’t receive Form 1099-K for personal transfers, experts say it’s possible, and the error may require you to junction the issuer or make adjustments to your tax return.

Your tax refund may also be slash because it’s more difficult to claim the charitable deduction in 2022.

Marguerita Cheng, a CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, said you won’t get a lenient tax break in 2022 if you don’t itemize deductions on your return.   

Congress gave charities a boost in 2021 by allowing choose donors to claim a deduction for up to $300 for cash donations or $600 for married couples filing together, regardless of whether you count, said Cheng, who also is part of CNBC’s Financial Advisor Council.

However, the tax break wasn’t extended for 2022. Now, you’ll no greater than benefit if your itemized deductions, including the tax break for charitable gifts, exceeds the standard deduction, which is minor common. In 2019, almost 90% of taxpayers used the standard deduction, according to the IRS.