A constantly changing tax code makes it hard for families to plan their financial lives, one expert says.
The teacher, who lives in Grand Blanc, Mich., had a daycare provider for her 4-year-old son that fit her family’s needs regarding quality, proximity and cost. But that cost had just increased by $100 a month, so part of her 2021 federal refund of approximately $6,500 went straight toward covering that increased monthly bill.The teacher, who lives in Grand Blanc, Mich., had a daycare provider for her 4-year-old son that fit her family’s needs regarding quality, proximity and cost.
There were no stimulus checks to claim in 2022, and pandemic-related increases to tax credits geared at families with children and at low- and middle-income workers without children reverted to prepandemic levels. That includes the child tax credit, which was enhanced for 2021 only. An effort to revive the credit’s boosted payouts did not make it into a 2022 year-end spending deal.
“Generally speaking, I think refunds are going to come back where they were in 2020,” said Mark Jaeger, vice president of tax operations at TaxAct, a tax-preparation software company. The number of households that claim the credit is low for a number of reasons, including the availability of other childcare subsidies for low-income families, as well as the use of informal caregiving arrangements between family and friends, Maag said.
But if households chose to receive the entire enhanced credit in their refund and were within the boosted credit’s income-eligibility rules , they likely received more last year than they will this year. Earned-income tax credit Like the child- and dependent-care credit and the child tax credit, the earned-income tax credit also got a temporary boost from the American Rescue Plan of March 2021. The biggest boost came for people who claim this credit and do not have kids in the household, so-called “childless workers.” Maximum earned-income tax credit payouts for those workers jumped from roughly $500 to $1,500.
Other deductions One deduction that allowed millions of Americans use charity donations to reduce their taxable income is gone. It’s the first-ever increase since the deduction’s 2002 enactment at $250, the agency noted. But as Colin Sharkey, executive director of the Association of American Educators, noted, “It’s possible current inflation has already erased that increase.” Sharkey’s organization has pushed to make the deduction $1,000, with $400 of that sum going to cover the cost of home internet.
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