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5 Tax Tips for the 2022 Filing Season

Several tax changes were announced in 2021. These tax tips for the 2022 filing season explain how a few of these changes could impact your return this year.

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If you're anything like me, you've been receiving lots of mail lately with an "Important Tax Document Enclosed" notice on the outside of the envelope and you've been seeing loads of ads for tax software companies.

Yes, tax season is once again upon us. And while 2021 may not have been quite as strange as 2020, it still contained its fair share of unusual events which could impact your taxes.

Before you jump into filing your return, you'll want to make sure that you're aware of the new requirements and opportunities that may apply to you this year. Check out these five tax tips for the 2022 filing season to help you get started.

1. Reconcile Your Advance Child Tax Credit Payments.

When the American Rescue Plan passed in March 2021, it included some big changes to the Child Tax Credit. While previously the credit was worth $2,000 at most, in 2021 it was worth up to $3,600 for dependents age 5 and below and $3,000 for dependents ages 6-17. The income limit to qualify for these maximum credits was $75,000 for singles, $112,500 for head of households, and $150,000 for married couples filing jointly.

Unlike in prior years where taxpayers could only be refunded up to $1,400 per eligible dependent, the expanded Child Tax Credit was also fully refundable. Finally, families were able to receive up to half of the credit in advance through monthly payments from July through December of 2021. However, those that preferred to wait until they filed their returns in 2022 to claim the full credit were allowed to opt out of this program.

The advance child tax credit payments may have provided a much-needed financial boon to many families who were struggling through another difficult year. But they also added some extra tax filing work as everyone who received advance payments will need to reconcile them on their returns. By "reconcile," we mean that you'll need to calculate whether you received too little or too much Child Tax Credit through advance payments.

The IRS generally based its advance payments on 2020 tax returns (or 2019 returns when 2020 returns weren't available). But if any key factors (like your household income or family size) changed in 2021, it could impact the amount of credit you actually qualified for. If you received less in advance payments than your Child Tax Credit amount, you can claim the difference on your return. But if your advance payments exceeded your Child Tax Credit amount, you may need to pay some of it back.

This repayment would reduce your tax refund or increase the amount of tax that you owe. However, there is a repayment protection provision that generally excuses taxpayers with low-to moderate incomes from repaying excess advance Child Tax Credit payments. To learn more about how to reconcile advance child tax credit payments or to see if you qualify for repayment protection, check out this IRS FAQ page.

2. Track Down Your Missing Stimulus Check.

In 2021, many taxpayers also received a third round of economic impact payments (EIPs). This third stimulus check was actually the largest of all — $1,400 per person in a qualifying household. This means most eligible families of four received $5,600.

As with the prior two rounds of payments, only taxpayers with incomes below certain limits qualified for the third stimulus check. These limits were:

  • Single filers: $75,000 to $80,000
  • Head-of-household filers: $112,500 to $120,000
  • Married couples filing jointly: $150,000 to $160,000

In the case of single filers, if your income was less than $75,000, you were owed the full credit. Above that level, the amount you qualified for gradually phased out until disappearing completely once your AGI reached at least $80,000.

Similar to the advance Child Tax Credit payments, eligibility for the third stimulus check was based on prior-year tax returns (2020 or 2019). But if your income decreased in 2021 or you gained a dependent, you may be eligible for more economic stimulus than you received last year.

The good news is that if you're owed stimulus money, you can claim the Recovery Rebate Credit (RRC) on your tax return to receive it. But unlike with excess Child Tax Credit payments (which may need to be repaid), you will not have to repay any of your EIP, even if you would have actually qualified for less based on your 2021 return.

3. Deduct Some (or More) of Your Charitable Donations.

Did you donate to charitable causes last year? If so, you should know that there were two significant expansions to the tax benefits of giving to charities that applied only to 2021.

First, non-itemizers are eligible to deduct up to $600 of their cash donations. That's a big deal as those who take the standard deduction aren't ordinarily allowed to claim any of their charitable donations as an extra deduction. But they can on their 2022 returns.

Second, itemizers are allowed to deduct up to 100% of their adjusted gross income (AGI) through qualified charitable contributions that were made in 2021. Normally, charitable giving deductions are limited to 20% to 60% of AGI.

The bottom line is that a lot of taxpayers will either be able to claim a charitable contribution deduction for the first time or will be able to claim a larger deduction than usual. So if you donated to charity in 2021, don't forget to take full advantage of these expanded tax benefits when you file your return.

4. Realize That Hurricane-Related Losses May Be Deductible.

Scores of families were affected by Hurricanes Ida, Nicholas, and others last year. And high insurance deductibles may have forced many affected homeowners to pay for repairs out of pocket. If you were one of the storm victims who suffered reimbursed home damage or lost property, you may qualify to claim a casualty loss tax deduction.

Typically, you can only take advantage of the casualty loss deduction if you're an itemizer. However, the IRS waives this requirement for taxpayers who had a "qualified disaster loss."

Note that qualified disaster loss victims must reduce each loss event by $500. So if you suffered $1,500 in unreimbursed hurricane damages last year, you can deduct a maximum of $1,000 on your taxes ($1,500 - $500 = $1,000).

It's important to note that you can't claim damages that were refunded by insurance companies. And the IRS also warns that you should not claim a casualty loss deduction if you have a "reasonable prospect of recovery through a claim for reimbursement."

5. Understand Who Qualifies for the Home Office Deduction (and Who Doesn't).

When the pandemic began in 2020, millions of us began working from home. And even though social distancing guidelines relaxed in many areas throughout 2021, many employers continued to allow or require their employees to work remotely.

If you worked from home last year, you may have heard about the home office deduction and are wondering if you qualify for this tax benefit. Unfortunately, the answer is probably no.

Through at least 2025, only self-employed workers are eligible for the home office deduction. So this isn't a deduction that W-2 employees can presently claim, even those who work from a home office every day.

But if you're a freelancer, independent contractor, or small business owner, you should definitely consider taking advantage of this deduction. For the 2021 tax year, you can claim $5 per square foot, up to a maximum of 300 square feet. Learn more about the home office deduction here.

The Bottom Line

The five tax situations explained above are far from the only ones that may impact your return in the 2022 filing season. Other notable 2021 tax changes include the extension of tax-free employer student loan payment assistance (up to $5,250), a lower floor for medical expense deductions, and an expanded Child and Dependent Care Credit.

For filers with fairly simple tax situations, a capable tax software will likely be able to uncover all the deductions or credits that they qualify for. But if your situation is more complicated, working with a certified tax preparer (such as a CPA or enrolled agent) may be the best way to reduce your tax bill or boost your refund.

Clint Proctor

Clint Proctor is a freelance writer and founder of WalletWiseGuy.com, where he writes about how students and millennials can win with money. His work has been featured in several major publications including Business Insider, U.S News and World Report, Yahoo Finance, and Forbes.