‘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 the small tax refund is child tax credit And this child and dependent care tax credit That has been reduced for 2022, explained certified financial planner Cecile Staton, president and wealth advisor at Arch Financial Planning in Athens, Georgia.

While both tax credits received a temporary boost through the 2021 American Rescue Plan, the enhanced tax breaks won’t be extended until 2022. “The big picture is that a lot of people are going to see less money in their pockets,” Staton said.

In 2021, the Child Tax Credit was offered up to $3,600 for each child under the age of 6 and $3,000 for each child aged 6 to 17, with half available through advance payments. But for 2022, the tax break reverts to the previous amount — up to $2,000 per child under age 17.

The Child and Dependent Care Tax Credit, which can help offset the cost of caring for children under 13 or adult dependents, has also been slashed for 2022.

In 2021, the credit increases to $8,000 for a single qualifying individual or $16,000 for two or more dependents. However, for 2022, those caps return to $3,000 and $6,000, respectively, for one or more dependents.

If you received payment through an app like Venmo or PayPal in 2022, You may receive a Form 1099-K as early as 2023Which reports earnings from third-party networks.

According to the IRS, the form applies to business transactions, such as part-time work, side jobs or selling goods.

Prior to 2022, the federal Form 1099-K reporting limit was for taxpayers with more than 200 transactions with an aggregate value of more than $20,000. Now, however, the limit is only $600, and even a single transaction can trigger the form.

Personal transactions like reimbursing your roommate for bills or dinner are not taxable, says Austin Chow, a CFP and wealth advisor at Menlo Asset Management in Menlo Park, Calif.

What’s more, you have to pay tax only on the profits, he said. For example, if you spent $150 on concert tickets in 2022 and sold them for $200, the $50 gain is taxable, Chou said.

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

Your tax refund may also be lower because it’s more difficult to do claim the charitable deduction In 2022.

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

Congress boosted donations in 2021 by allowing single donors to claim a deduction of up to $300 for cash donations or $600 for married couples filing together. regardless of whether you create the item or notsaid Cheng, who is also part of CNBC’s financial advisory council,

However, the tax break was not extended until 2022. Now, you only benefit if your itemized deductions, including tax breaks for charitable gifts, exceed the standard deduction, which is less common. In 2019, about 90% of taxpayers used the standard deduction, according to irs,