IRS Changes in Play for 2022 Tax Season

In some ways, the pandemic relief party is over for some taxpayers.

The 2023 tax filing deadline is Tuesday, April 18, 2023, which gives the public about 100 days to meet their tax obligations for 2022 – and hopefully, keep more of their money in their pocket at the same time.

Working with a professional accountant is the best way to curb Uncle Sam’s share of your 2022 income. Past that, staying on top of the Internal Revenue Service's new rules and policy changes can help turn the tide when the tax bill comes due for 2022.

New Rules for the 2022 Tax Year

This year’s tax law changes may not be earth-shattering, but the ones on the table can certainly impact your tax filing experience. Here’s a snapshot.

IRS pandemic leniency fades away. Taxpayers may be in for a rude awakening for 2022 as the country and the IRS shift back to pre-covid “normal” for many individual tax credit and deduction items.

“For example, the American Rescue Plan Act of 2021 temporarily expanded many tax credits by increasing thresholds and eligibility requirements, so an increased number of taxpayers reaped the benefits during the pandemic,” said Wiss & Company senior tax manager Nicole Derosa. “When taxpayers file their 2022 tax returns, they will see fewer refundable tax credits, which will impact their bottom line and potentially result in less of a refund or a higher balance due.”

Parents may take the brunt of those tax break impactors.

“The Child Tax Credit has been restored to its normal credit thresholds,” said Derosa. “Adjusted gross income limits still apply, so if you make too much money this credit is not applicable. Additionally, the Child and Dependent Care Credit have also been restored to its pre-Covid status.’

Consequently, U.S. taxpayers who received $3,600 per dependent in 2021 for the Childcare Tax Credit will, if eligible, receive $2,000 for the 2022 tax year. The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.

The end to the $300 charitable deduction. During the covid-19 pandemic, the IRS permitted taxpayers to lower their overall income by up to $300 when they donated cash to tax-qualified initiatives, Brooks noted. “The above-the-line deduction will not be available going forward,” he said.

A shift in tax brackets. In 2022, the tax brackets increased, but tax rates remained the same.

“That’s good news, as the “change indicates that more taxpayer money is taxed at lower rates than in prior periods,” said CoinLedger director of tax strategy Miles Brooks.

According to JustAnswer certified public accountant Jeffrey Jackson, major tax bracket changes for the 2022 tax year are as follows:

Marginal tax rates: For the tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).

The other rates are:

35%, for incomes over $215,950 ($431,900 for married couples filing jointly)
32% for incomes over $170,050 ($340,100 for married couples filing jointly
24% for incomes over $89,075 ($178,150 for married couples filing jointly)
22% for incomes over $41,775 ($83,550 for married couples filing jointly)
12% for incomes over $10,275 ($20,550 for married couples filing jointly

“The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly),” Jackson said.

Changes to the earned income credit. For the Earned Income Tax Credit, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022.

“The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for the tax year 2021,” Jackson noted.

Standard deduction adjustments. The standard deduction for married couples filing jointly for the tax year 2022 rises to $25,900 – that’s up $800 from the prior year.

For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for the tax year 2022, up $600.

Alternative Minimum Tax shift. The AMT exemption amount for the tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800).

“The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200),” Jackson noted.

Estate tax exclusion boost. Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000. “That’s up from a total of $11,700,000 for estates of decedents who died in 2021,” Jackson added.

Gift tax exclusion. The annual exclusion for gifts rises to $16,000 in the 2022 tax year,. That figure is up from $15,000 in 2021.

All In All, a Better Year for Taxpayers (Except for Some Refunds)

“2022 tax year changes will decrease the effective tax rate because there will be more deductions and less tax paid on income,” Jackson said. “That means if a taxpayer earns the same as they did in 2021 they will pay less in taxes.”

“Although, tax refunds will likely be lower for most families because many tax credits expired in 2021.”