Check New Rules on Credits and Deductions
Tax credits and deductions can reduce your tax bill significantly or increase your refund if you have one coming. The American Rescue Plan Act temporarily increased certain tax credits and added a special rule for charity deductions. Now that these programs are ending, check the eligibility rules and deduction amounts to see what’s currently available.
Here are a few credits and a deduction to consider:
- Child tax credit: In 2021, you may have received a temporary child tax credit of up to $3,600 per eligible child, half of which was sent as monthly advance payments. In 2022, the Child Tax Credit returns to its 2019 amount: up to $2,000 per eligible child.
- Child and dependent care credit: The child and dependent care credit topped out at $8,000 in 2021. In 2022, it has a maximum of $2,100.
- Earned income tax credit: Generally speaking, earned income tax credits are lower this year than last. Check with the IRS for details on new income eligibility and credits for 2022.
- Premium tax credit: If you purchased health insurance through the health insurance marketplace in 2022, the American Rescue Plan Act temporarily expanded eligibility for this credit by including taxpayers with household incomes above 400% of the federal poverty line.
- Clean energy vehicle credit: Tax credits of up to $7,500 are still available for qualifying electric and plug-in hybrid vehicles, but eligibility rules changed with the passage of the Inflation Reduction Act in 2022. Check to make sure your vehicle purchase qualifies before claiming the credit.
- Donations to charity: In 2021 only, charitable donations were deductible as a separate line item even if you took the standard deduction. This year, you’ll have to itemize your deductions if you want to claim a deduction for charitable giving.
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