The IRS warns that tax refunds could be “a little lower”. With high inflation, it’s a “double whammy” for families,…
Generally, you can expect a federal refund if you overpaid taxes or withheld more than you owe. One of the main reasons for lower payments this year is the expiration of pandemic relief, which was provided through tax breaks for 2021 returns, experts say.
Joe Buhrmann, certified financial planner and senior financial planning consultant at eMoney Advisor, said lower repayments and high inflation could be a “double whammy” for some families.
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Why Your 2022 Tax Refund May Be Lower
There are several reasons why some filers may get a “nasty surprise” when filing their tax returns this year, Buhrmann said.
Thanks to the 2021 US bailout, many families have been boosted by the Child Tax Credit of up to $3,600 per child and Child and Dependent Tax Credit of up to $4,000 per dependant.
But those tax breaks have returned to earlier levels. For 2022, the Child Tax Credit has returned to a maximum of $2,000 per child, and the Child and Dependent Tax Credit has returned to $1,050 per dependent. “It’s money on refunds,” Buhrmann said.
If you hadn’t received the third stimulus payment, you had the option of claiming it on your 2021 statement, which would increase repayments, he said.
Another pandemic-era change was a more generous charitable deduction in 2021, allowing filers to get tax relief, even if they didn’t itemize deductions.
The deduction — $300 for single filers or $600 for married couples filing jointly — was a “significant amount” for many Americans, said Wealthfront CPA Tony Molina.
How to boost your reimbursement or reduce your bill
Although there are not many ways to increasing your refund or lowering your bill before the April 18 tax deadline, you may still have a few options, Molina said.
“One easy thing is that you can always contribute to a [individual retirement account]and count it for the last year, he said, which may provide a tax deduction. Your eligibility for the tax break depends on your income and your participation in the workplace pension plan. .
There’s also still time to make contributions to the 2022 Health Savings Account, which also offers a deduction, assuming you have an eligible high-deductible health insurance plan.