Why 2022 Tax Refunds are Smaller

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Tax refunds are flexible entities that fluctuate in size each year based on several factors. Many early filers were surprised to find that their 2022 refund is smaller than the previous two years.

The main reason for the difference in refund size is some of these tax credits expired, and some were rolled back to their original rates beginning in 2022.

Here are some expired and rolled-back pandemic tax credits affecting 2022 tax refunds.

Expired Tax Credits

The following 2020 & 2021 tax credits have expired and will not be claimed on 2022 returns.

Stimulus Payments

Many Americans were eligible for pandemic stimulus payments, valued up to $1,200, in 2021. These payments were no longer available in 2022.

Expanded Child Tax Credit

The federal government enacted an expanded child tax credit of $3,600 for each qualifying child in 2020 and 2021. This credit was dissolved in 2022.

Rolled Back Tax Credits

The following tax credits have been rolled back to their original pre-2020 rates.

Child and Dependent Tax Credit

The child and dependent tax credit was reduced in 2022 from the 2021 rate, falling from $3,600 to $2,000 per child and $4,000 to $1,050 per dependent, respectively.

Charitable Contributions

The Federal government allowed for simplified reporting and an increased deduction on charitable contributions of up to $300 for 2021. In 2022, taxpayers must return to itemizing their deductions. In addition, the ceiling on charitable cash contributions to qualified charities has been restored to the usual 60% of Adjusted Gross Income (AGI).

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) for low- to moderate-income families and people without children is now set at $500 instead of the 2021 level of $1,500.

A Piece of Good News: Shorter Processing Times for 2022 Refunds

While refunds may be smaller in 2022, early filing data suggests that the average time to process refunds is significantly shorter than in 2021.

Knowing what changes have been made and how they affect your refund can help you make informed decisions on filing taxes.

Have questions about how these changes impact your unique tax situation or financial future? Our experts are here to help. Contact Us.