As we close out the year and get ready for tax season, here’s what individuals and families need to know about tax provisions for 2022.
INDIVIDUALS – TAX CREDITS
In 2022, a nonrefundable (i.e., only those with tax liability will benefit) credit of up to $14,890 is available for qualified adoption expenses for each eligible child.
Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2022. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher-income earners, the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income. This tax credit is nonrefundable.
Child Tax Credit and Credit for Other Dependents
For 2022, the child tax credit reverts to $2,000 per child, under the age of 17. The refundable portion of the credit is $1,400 in 2022, so that even if taxpayers do not owe any tax, they can still claim the credit. A $500 nonrefundable credit is also available for dependents who do not qualify for the Child Tax Credit (e.g., dependents age 17 and older).
Earned Income Tax Credit (EITC)
For the tax year 2022, the maximum earned income tax credit (EITC) for low, and moderate-income workers and working families increased to $6,935 (up from $6,728 in 2021). For taxpayers with no qualifying children, the maximum credit is $560.
The maximum income limit (three or more qualifying children) for the EITC increased to $59,187 (up from $57,414 in 2021) for married filing jointly and $53,057 for taxpayers whose filing status is single or head of household. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.
INDIVIDUALS – EDUCATION EXPENSES
Coverdell Education Savings Account
You can contribute up to $2,000 a year to Coverdell savings accounts in 2022. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.
American Opportunity Tax Credit and Lifetime Learning Credit
The maximum credit is $2,500 per student for the American Opportunity Tax Credit. The Lifetime Learning Credit remains at $2,000 per return. To claim the full credit for either, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly).
Employer-Provided Educational Assistance
As an employee in 2022, you can exclude up to $5,250 of qualifying postsecondary and graduate education expenses that are reimbursed by your employer.
Student Loan Interest
In 2022, you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $70,000 (single) or $140,000 (married filing jointly). The credit cannot be claimed if your modified adjusted gross income (MAGI) is more than $85,000 for single filers ($170,000 if married filing jointly).
If you have any questions about these and other tax provisions that could affect your tax situation, don’t hesitate to call.
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