Tax Tips for Everyone is created to provide updates on current tax topics and increase understanding of terms and issues on income and other taxes.
Child Tax Credit
The child tax credit for 2021 was increased from $2000 to $3000 ($3600 for a child under age 6). A portion of the credit was paid in advance as monthly payments from July through December 2021. The individuals and families who received the advance child tax credits from July through December will have to reconcile it on their 2021 income tax return. Unless one opted out they should have received either $250 or $300 per month for each child ($1500 or $1800 total) during 2021. This amount is equal to one-half of the $3000 or $3600 (for a child under age 6) child tax credit which is allowed on their 2021 tax return.
The IRS has been sending out Letter 6419 to everyone who received the advance child tax credit payments. The amount shown on the Letter 6419 needs to be compared to the amount actually received by check or by direct deposit to verify accuracy. The IRS has already acknowledged errors in some of the letters. To double check the amount the IRS thinks was paid, one can also establish an online IRS account to verify the amount listed there. It is possible for the it to be different from the amount in the letter 6419. Be sure to take all Letter 6419s received to your tax preparer. In some cases, each spouse may receive a separate Letter 6419.
Hopefully, the amount in Letter 6419 is correct. To file your taxes a Schedule 8812 is completed to calculate the amount of tax credit still due to you or in rare cases the amount owed back to the IRS. Schedule 8812 also allows one to claim the credit for a child born during 2021. Unless additional legislation is passed the Child Tax credit for 2022 returns to $2000 per child.
Charitable Donation Deduction
In the past few years, unless one could itemize deductions there was generally no deduction for donations to charities. On a 2021 tax return a charitable donation deduction is allowed for cash donations up to $300 per single return or $600 for a married filing joint return. This is allowed for those filing using the standard deduction. Add up all cash donations to any 501(C) type charities or church and take advantage of this tax break. This deduction also expired at the end of 2021 and will not be available for 2022 without further legislation.
Lower RMDs Required
For 2022 due to changes in the longevity tables used to calculate the Required Minimum Distribution payments from IRAs and 401Ks those age 72 and older will be required a smaller amount be paid from their retirement accounts.
Due Date
The deadline for filing a 2021 tax return is April 18, 2022 unless you live in one of the areas impacted by a natural disaster. Check with your tax preparer or the IRS for any extension in your area.
Standard Deduction for 2021 & 2022
| Filing Status | 2021 Tax Year | 2022 Tax Year |
|---|---|---|
| Single or Married filing separately | $12,550 | $12,950 |
| Married, filing jointly | $25,100 | $25,900 |
| Head of household | $18,800 | $19,400 |
Federal Income Tax Brackets for 2021 & 2022
Tax due is calculated on taxable income (after all deductions) not gross income.
Income Tax Brackets and Rates in 2021 (for taxes due April 18, 2022)
| RATE | Taxable Income (Single) | Taxable Income (Joint) |
|---|---|---|
| 10% | $0 to $9,950 | $0 to $19,900 |
| 12% | $9,951 to $40, 525 | $19,901 to $81,050 |
| 22% | $40,525 to $86,375 | $81,051 to $172,750 |
| 24% | $86,375 to $164,925 | $172,751 to $329,850 |
Additional rates for 32%, 35% and 37% not listed
Income Tax Brackets and Rates in 2022 (for taxes due April 15, 2023)
| RATE | Taxable Income (Single) | Taxable Income (Joint) |
|---|---|---|
| 10% | $0 to $10,275 | $0 to $20,550 |
| 12% | $10,276 to $41,775 | $20,551 to $83,550 |
| 22% | $41,776 to $89,075 | $83,551 to $178,150 |
| 24% | $89,076 to $170,050 | $178,151 to $340,100 |
Additional rates for 32%, 35% and 37% not listed