What to Know for the 2023 Tax Season
Disclaimer: This material is prepared for informational purposes only and is not tax advice. Please speak with a tax professional or view the resources linked in the article to see how this information may apply to you.
A new year means new changes! In this post, we’re going over the changes made for the 2022 tax year that you will see when filing your taxes this year.
Temporary Credits and Deductions
2020 and 2021 saw some big tax breaks. However, most of those expired at the end of 2021 without renewal. This means that some taxpayers may receive a significantly smaller refund this year. Here are the credits and deductions that were affected by temporary changes and what they looked like in 2022:
Child Tax Credit
The Child Tax Credit returned to $2,000 per child and is only partially refundable for some lower-income taxpayers. Children who are 17 years old do not qualify although they can still qualify for the $500 other dependent credit.
Child and Dependent Care Tax Credit
The Child and Dependent Care Tax Credit returned to its previous eligible expense amount and maximum credit percentage. The credit is allowed for up to $3,000 in expenses for one dependent and $6,000 for more than one. Taxpayers can deduct up to 35% of their expenses which means that for one dependent, taxpayers can get up to a $1,050 credit while families with more than one child can receive up to $2,100. The credit is no longer refundable and the full credit amount is only available for families making less than $15,000 a year.
Learn more about the Child and Dependent Care Credit.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) has returned back to its 2019 eligibility rules. Taxpayers must be between the ages of 25-65 and you are no longer able to use a previous year’s earned income to calculate your EITC. In 2021, the credit for childless workers significantly increased by almost triple the amount. However, this year it has dropped closer to its 2020 level.
| Children | Single, Head of Household, and Widow AGI | Married Filing Jointly AGI | Max Credit Amount |
|---|---|---|---|
| Zero | $16,480 | $22,610 | $560 |
| One | $43,492 | $49,622 | $3,733 |
| Two | $49,399 | $55,529 | $6,164 |
| Three or More | $53,057 | $59,187 | $6,935 |
Learn more about the Earned Income Tax Credit.
Charitable Deductions
Only taxpayers who itemize on their tax return can claim a charitable deduction. In 2020 and 2021, taxpayers taking the standard deduction were able to deduct up to $300 in charitable contributions, however, in 2022, those benefits ended.
Learn more about charitable contributions.
Business Meal Deductions
In 2021 and 2022, businesses were generally able to deduct 100% of the cost of business-related food and beverages purchased from restaurants. The deduction will return to 50% of the cost of the meal in 2023.
2022 Rates and Limits
Standard Deduction
Here are the rates for the 2022 standard deduction based on filing status:
Single and married filing separately: $12,950
Head of household: $19,400
Married filing jointly: $25,900
Rates will vary for those 65 years and older and those with blindness.
Learn more about standard deduction vs. itemized deductions.
Standard Mileage Rate
The IRS raised the standard mileage rate at the beginning and in the middle of 2022 to account for raising gas prices throughout the year. Here are the rates for tax year 2022:
| Purpose | January 1 - June 30 rate per mile | July 1 - December 31 rate per mile |
|---|---|---|
| Business | 58.5 | 62.5 |
| Medical/Moving | 18 | 22 |
| Charitable | 14 | 14 |
Retirement Savings
The contribution limit for simple IRAs was $14,000 in 2022, up from $13,500 in 2021. For those 50 years and older, they can include an extra $3,000. The contribution limit for traditional IRAs and Roth IRAs remained at $6,000 plus an additional $1,000 catch-up contribution for those 50 years and older.
Education Expense Deduction
The Education Expense Deduction increased to $300 for out-of-pocket expenses for eligible educators, up from $250 in 2021.
Learn more about the Education Expense Deduction.
1099-K Reporting Threshold Delayed
Originally planned to take effect in 2022, the IRS has postponed the 1099-K reporting threshold until 2023. Once the change is implemented, taxpayers who receive more than $600 on a third-party payment website or app for goods and services, such as PayPal, Venmo, eBay, and Upwork, will receive a Form 1099-K. The limit will remain at $20,000 and 200 transactions for tax year 2022.
Learn more about Form 1099-K.
Working Families Tax Credit
While this isn’t directly related to filing your tax return, we want to mention a new tax credit for low-to-moderate income Washington residents administered by the Washington State Department of Revenue. Once taxpayers file their tax return, they can apply for the credit online at WorkingFamiliesCredit.wa.gov or by mailing in an application. The credit amount is based on income level and the number of qualifying children, with the minimum credit being $50.
Need help filing your 2022 tax return?
If you need help filing your taxes this year, we can help! Give us a call at (360) 922-0235. Our tax preparers stay up to date on all the newest tax changes and have years of experience filing taxes for a wide variety of situations. You can trust you’re in good hands when you file with Northside Tax Service.
