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17 Ways Your Income Taxes Will Be Different in 2023

The next tax season will bring a rude awakening for many Americans.

Several tax breaks that led to bigger refunds or smaller bills during the tax season that just ended — if not also during the season before that — won’t be available any longer. That’s because they were temporary changes intended to help Americans weather the worst of the COVID-19 pandemic.

Some taxpayers, though, might find themselves better off when they file their 2022 tax return, the one that’s due by April 2023. That’s because of routine inflation adjustments that increase the value of or threshold to qualify for certain tax credits and deductions.

Whether you are in for a rude awakening or a pleasant surprise next year depends in large part on which tax breaks you qualify for. So here’s a look at some ways the tax breaks that were available for the 2021 tax year will differ for 2022.

The bad news

1. No recovery rebate credit

For the past two years, a vast majority of Americans received stimulus payments (which the IRS calls economic impact payments, or EIPs). And for the past two years, those who were eligible for a stimulus payment but didn’t receive one could claim it as tax credit, known as the recovery rebate credit, when they filed their return.

When you filed your 2021 return, for example, your tax pro or tax software likely asked you whether you received the third stimulus payment, which was issued in 2021 and worth $1,400 per eligible person. That was to determine whether you should receive the recovery rebate credit for 2021.

But at least so far this year, Congress has not passed legislation authorizing further stimulus payments. So unless Congress authorizes a fourth payment before the year is over, no stimulus payments will be issued in 2022, which would mean the recovery rebate credit would not appear on 2022 tax returns.

2. No charitable deduction for non-itemizers

Generally, taxpayers who choose to take the standard deduction, as opposed to itemizing their tax deductions, cannot write off donations to charities. But a federal law known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 made an exception to that rule, allowing people who claim the standard deduction to write off up to $300 in monetary contributions in 2020 as a way to encourage donations to charities during the pandemic.

Later, that deduction was expanded and extended for 2021, but it has not been extended since then. So, unless Congress extends it for a second time, people claiming the standard deduction will not qualify for a deduction for charitable donations they make in 2022.

3. No earned income tax credit for seniors

For years, one of the most valuable credits in the tax code — the earned income tax credit (EITC) — was unavailable to taxpayers age 65 and older. But a federal law known as the American Rescue Plan Act of 2021 lifted that age limit for the 2021 tax year, which meant that some seniors who worked in 2021 received the EITC when they filed their last return.

That change was effective only for the 2021 tax year, though. In other words, under the current tax code, no seniors age 65 or older will qualify for the EITC in the future.

To learn more: If you’re wondering whether you received the EITC or how big it was for you this past tax season, check line 27a of your 2021 tax return (IRS Form 1040 or 1040-SR).

4. No earned income tax credit for young adults

Usually, the earned income tax credit is available to eligible workers from ages 25 through 64. The lower end of that age range was lowered just for 2021 by the American Rescue Plan Act, however, making it available to certain workers ages 19 to 24 as well as 18-year-olds who were formerly in foster care or were homeless.

So under the current tax code, no one under the age of 25 will qualify for the EITC when they file their 2022 tax return next year.

To learn more: If you’re wondering whether you received the EITC or how big it was for you this past season, check line 27a of your 2021 tax return (IRS Form 1040).

5. A less valuable earned income tax credit for taxpayers without qualifying children

The total value of the EITC depends in part on how many qualifying children you have. For taxpayers with no qualifying children, the maximum value of this credit jumped from $538 in 2020 to $1,502 in 2021, thanks to the American Rescue Plan Act.

But that was a temporary boost. For the 2022 tax year, those who are eligible for the EITC and have no qualifying children can expect to receive no more than $560.

To learn more: If you’re wondering whether you received the EITC or how big it was for you this past season, check line 27a of your 2021 tax return (IRS Form 1040).

6. A less valuable child tax credit

The American Rescue Plan Act also made the child tax credit more valuable for 2021 in a couple of ways, including by:

  • Increasing the maximum value of the credit from $2,000 to $3,600 for children ages 5 and older and $3,000 for children ages 6 through 17.
  • Increasing the maximum qualifying age to 17. (Previously, children had to be 16 or younger to qualify.)

But as with the earned income tax credit, these changes to the child tax credit were temporary. So it’s safe to say most parents should expect to receive a smaller child tax credit for 2022.

To learn more: See the IRS’ latest fact sheet about the 2021 child tax credit.

The good news

1. A bigger deduction for teachers

Since 2002, teachers have been able to deduct up to $250 of classroom expenses for which they were not reimbursed — such as books, supplies and equipment that they use in the classroom and pay for out of pocket.

But starting with the 2022 tax year, the maximum amount of this deduction increased for the first time, to $300. This is not a one-tax-year-only change, either, so the deduction will be worth up to $300 for 2022 and beyond.

To learn more: See the IRS announcement about this change.

2. Higher standard deductions

Standard deductions generally rise each year on account of adjustments for inflation. For 2022, the standard deduction amounts for the following tax-filing statuses are:

  • Married filing jointly: $25,900 — up $800 from 2021
  • Married filing separately: $12,950 — up $400
  • Surviving spouse: $25,900 — up $800
  • Head of household: $19,400 — up $600
  • Single: $12,950 — up $400

The standard deduction reduces the amount of your income that’s subject to federal taxes. So, if a single person is eligible for and chooses to take the standard deduction (as opposed to itemizing deductions) on their 2022 tax return, they would not be taxed on the first $12,950 of their income from 2022.

To learn more: See “Here’s Your New Standard Tax Deduction for 2022.”

3. Higher income brackets

Income tax brackets also tend to rise annually. For 2022, the income brackets are as follows for folks whose tax-filing status is single, for example:

  • 10% tax rate: Applies to taxable income of up to $10,275 — up from $9,950 for 2021
  • 12%: More than $10,275 — up from $9,950
  • 22%: More than $41,775 — up from $40,525
  • 24%: More than $89,075 — up from $86,375
  • 32%: More than $170,050 — up from $164,925
  • 35%: More than $215,950 — up from $209,425
  • 37%: More than $539,900 — up from $523,600

To learn more: See our article detailing the 2022 brackets.

4. Higher contribution limits for (some) retirement accounts

For the 2022 tax year, you may save more money in five types of workplace retirement accounts:

  • 401(k) plans
  • 403(b) plans
  • Most 457 plans
  • Thrift Savings Plan
  • Savings Incentive Match Plan for Employees (SIMPLE)

The base contribution limit for 401(k) plans, for example, is $20,500 — up from $19,500 for 2021.

To learn more: See “IRS Raises 5 Retirement Contribution Limits for 2022.”

5. Higher income limits for IRAs

The contribution limits for individual retirement accounts (IRAs) did not increase for 2022, but the income limits did.

The income limits for Roth IRAs determine whether you’re eligible to contribute to such an account at all, whereas the income limits for traditional IRAs determine whether you are eligible to make tax-deductible contributions to such an account.

Both types of income limits have increased for 2022. For example, the income phase-out range for Roth IRA contributions for a single person is $129,000 to $144,000 — up from a range of $125,000 to $140,000.

To learn more: See our article detailing the IRA income limits for 2022.

6. Higher contribution limits for HSAs

Workplace retirement accounts are not alone. Contribution limits for health savings accounts (HSAs) also tend to increase each year.

For 2022, the base contribution limits for folks who are eligible for an HSA and have the following types of high-deductible health insurance policies are:

  • Self-only coverage: $3,650 — up from $3,600 for 2021
  • Family coverage: $7,300 — up from $7,200

To learn more: See “IRS Increases Limits for This Tax-Free Account for 2022.”

7. Higher income limits for the saver’s credit

For 2022, the saver’s credit, officially known as the retirement savings contributions tax credit, has higher income limits.

You might be eligible for this credit in 2022 if you contribute to a retirement account and your adjusted gross income (AGI) is not more than:

  • Married filing jointly: $68,000 — up from $66,000 for 2021
  • Head of household: $51,000 — up from $49,500)
  • All other tax-filing statuses: $34,000 — up from $33,000

To learn more: See “3 Tax Credits That Will Be More Generous in 2022.”

8. A more valuable earned income tax credit for taxpayers with qualifying children

For 2022, both the income limits and the maximum value of the earned income tax credit (EITC) are higher.

You might be eligible for the EITC on your 2022 return if your AGI is not more than:

  • Married filing jointly: $59,187 — up from $57,414 for 2021
  • All other tax-filing statuses: $53,057 — up from $51,464

The maximum amount that the EITC is worth for 2022 is $6,935 — up from $6,728.

To learn more: See “3 Tax Credits That Will Be More Generous in 2022.”

9. A more valuable adoption tax credit

The tax credit for qualified adoption expenses is more valuable for 2022. The maximum allowable credit amount is $14,890 — up from $14,440 for 2021.

To learn more: See “3 Tax Credits That Will Be More Generous in 2022.”

10. A higher gift tax exclusion

Unless perhaps you’ve been fortunate enough to give someone a gift worth at least five figures, you might not have heard of the gift tax. It is a tax that a gift-giver generally owes on the value of a large gift. Smaller gifts are excluded from this tax.

For 2022, the amount of that exclusion is $16,000 — up from $15,000 for 2021. This means that if you give someone a gift worth less than $16,000 this year, you won’t owe the gift tax.

To learn more: See the IRS’ frequently asked questions on gift taxes.

11. A higher cap on Social Security payroll taxes

The maximum amount of a worker’s income that is subject to Social Security payroll taxes is $147,000 for 2022 — up from $142,800 for 2021. This means that if you’re fortunate enough to earn more than $147,000 this year, you won’t owe Social Security payroll taxes on every dollar you earn.

To learn more: See “5 Ways the Social Security System Will Change in 2022.”

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