For the most part, tax law for individuals has been consistent from 2021-2022. This is a huge sigh of relief for us tax preparers. The last few years have been filled with last minute tax deadline changes, stimulus payments to track, changes in credits, advanced credits… you name it.
For you as a taxpayer, you should expect things to be remain mostly the same when comparing the affect of 2021 tax law to 2022 tax law.
But, there are two main items to be aware of that could result in a lower or higher refund this year when compared to last years (with all else being equal).
- No Stimulus Payments.
You may have had a stimulus payment included in your refund last year. While many received these payments by check or direct deposit in 2021, others did not. If you had not received your stimulus check and were entitled to it, it was added to your refund when you filed your 2021 return. This could have resulted in an increased refund amount of up to $1,200 per person. If you had your stimulus check included in your 2021 refund, be aware this will not be the case for your 2022 filing.
- Changes to Child Tax Credits.
In 2021, the government sent out advanced payments on the child tax credit starting in July. From this perspective, your 2021 refund may have been less than usual as you may have received some of your tax credit in advance rather than receiving the full amount on your return. The credit was also increased from $2,000 per qualifying child to $3,600 for children under 6. For 2022, no advanced credits were issued, and the credit is back to $2,000 per qualifying child regardless of age. Depending on the age of your children, these two updates to the credit may work to increase or decrease the child tax credit you receive on your 2022 tax return when compared to 2021.
Keep these two changes in mind when projecting your possible refund and cash flow.
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