Changes for the 2022 tax year reflect recent economic changes and some tax law reversals as COVID-19 related tax relief is winding down.
Here’s a look at what to expect when you file your 2022 return (taxes filed in 2023).
New tax law updates and when they take effect:
- There are no longer exceptions to the 25-year-old age minimum required to claim the Earned Income Tax Credit. The maximum EITC and income amounts are now $560 and $16,480, respectively. This is effective Jan. 1, 2023.
- Effective Jan. 1, 2023, the Child Tax Credit is now $2,000 for kids under 17 with no advanced payments or reconciliation.
- Starting Jan. 1, 2023, the Child and Dependent Care Credit is now 35% of those expenses.
- Insulin Savings for Medicare Recipients: Effective Jan. 1, 2023, Medicare recipients on insulin will pay no more than $35 for a month’s supply.
- Premium Tax Credit Subsidy Extension: Subsidies for taxpayers who purchased healthcare through the federal marketplace will continue under the Inflation Reduction Act through 2025.
- Residential Energy Efficient Property Credit – This can be claimed on Part I of Form 5695 – Residential Energy Credits (this will be renamed to the Residential Clean Energy Credit in 2023). This has been extended through 2034, and portions of this enhanced credit will be retroactive to the beginning of 2022.
- In 2023, the Residential Clean Energy Credit will increase to 30% (up from 26% in 2021) for the installation of solar panels or other equipment that harnesses renewable energy. Starting on Jan. 1, 2023, the credit will expand to include expenditures for batteries used to store electricity generated from these systems.
- Nonbusiness Energy Property Credit – This can be claimed on Part II of Form 5695 and has been extended to 2032. This credit is now 30% (up from 10%) of the amount paid for qualified energy-efficient improvements made to your main home. Beginning in 2023, the maximum credit will be $1,200 annually (or up to $2,000 for water pumps and heaters, up to $600 for windows, and $500 for doors). This has changed from 2022 and earlier, when the credit was subject to a $500 lifetime maximum.
- Clean Vehicle Credit (new vehicles): Starting Jan. 1, 2023, taxpayers can claim a (one-time) $7,500 nonrefundable credit for the purchase of a plug-in electric vehicle. To claim the credit, your vehicle must meet the following price caps and income limitations.
- $55,000 for cars, $80,000 for SUVs. $300,000 for joint returns, $225,000 for Head of Household, and $150,000 for single filers.
- Clean Vehicle Credit (used vehicles): Effective Jan. 1, 2023 – Buyers of a used electric vehicle can claim a (one-time) $4,000 nonrefundable credit. However, the purchase must meet the following requirements:
- The vehicle must be purchased after Dec. 31, 2022.
- The used vehicle must be at least 2 years old.
- The vehicle must have an eligible VIN number.
- The vehicle must be sold through an eligible dealer (not a private sale).
- A credit (either new or used) was not claimed for the vehicle.
- To claim the credit, there is a $25,000 price cap on the vehicle and income limitations ($150,000 for joint returns, $112,000 for HOH, and $75,000 for single filers).
Several Earned Income Tax Credit reversals to pre-pandemic regulations
There have been several changes to the Earned Income Tax Credit (EITC) – the majority of which are reversals to the 2020 provisions.
There are no longer exceptions for the minimum age of single filers collecting the EITC. You must be 25 years old without qualifying children to claim this credit. Also, the age cap for single taxpayers has reverted to its normal limit of age 65.
In addition, you no longer have the option to use your prior year’s income to claim the EITC. The maximum amount of EITC for a single taxpayer is now $560. This is the 2020 dollar amount with consideration for inflation. The maximum income for a single filer has also been lowered to $16,480.
Lastly, you can claim the EITC with investment income, as long as your investment earnings are under $10,300. This amount is adjusted for inflation from the 2021 amount of $10,000.
The Recovery Rebate Credit is no longer in effect
The Recovery Rebate Credit was put in place to ensure that stimulus payments were distributed in the correct amounts to the correct people. The credit is no longer relevant since economic impact payments were not distributed in 2022.
The Child Tax Credit decreased and is no longer fully refundable
The Child Tax Credit is redeemable for children up to age 17 and has been reduced to $2,000 (the same amount as in 2020). Up to $1,500 of the Child Tax Credit is refundable for each qualifying child. This has increased over the 2020 dollar amount and decreased from the 2021 amount.
The refundable amount can be calculated on Schedule 8122, and it is limited to 15% of earned income on your return over $2,500.
To receive the Child Tax Credit this year, you must have earned income. You can calculate this the same way you did for tax year 2020. The Child Tax Credit will phase out if your adjusted gross income is $200,000 (or $400,000 for married filing jointly).
For taxpayers with earnings above the threshold, the credit is reduced by a dollar amount equal to 5% for each $1,000 of income that exceeds the adjusted gross income limits.
In 2022, no advanced Child Tax Credit payments were made, so there is no need for a reconciliation to be in place for advanced payments this year.
If you live in Puerto Rico, you can claim the Child Tax Credit for each child under 17 years old who is claimed as a dependent on Form 1040-SS or 1040-PR. To receive the refundable part of The Child Tax Credit, you must report income that proves that you’ve paid Medicare, Social Security taxes, and/or self-employment taxes. You no longer need to have three or more qualifying children to claim the refundable portion of the Child Tax Credit.
If you’re currently living abroad, you can claim the Child Tax Credit on your tax return as long as you don’t claim the Foreign Earned Income Exclusion on Form 2555.
The Child and Dependent Care Credit decreased and is nonrefundable
If you paid for child or dependent care in 2022, you could be eligible to claim a nonrefundable credit for up to 35% (down from 50% in 2021) of those expenses. Taxpayers who meet the adjusted gross income requirements can get $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals.
Coronavirus-related retirement plan distribution exceptions are no longer in effect
Retirement plan or IRA withdrawals made after Dec. 31, 2020, are no longer considered Coronavirus-related distributions. If you received the third and final installment of the 2020 Coronavirus-related distributions, you must report it using Form 8915-F.
You must itemize to deduct charitable contributions
The Charitable Deduction for non-itemizers of $300 ($600 for married filing jointly) has not been extended for 2023. The deduction for charitable contributions will be on Schedule A. If you use Schedule A, the limitation on cash contributions will be 60% of your adjusted gross income.
Are tax brackets changing in 2023?
Tax brackets for tax year 2022 have been adjusted for inflation from last year’s brackets. However, the seven income ranges remain unchanged.
The seven federal tax brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Find the tax bracket that corresponds with your taxable income and filing status below.
Tax Year 2022 Brackets for Single Filers
| If your taxable income is: | Then, tax due is: |
| Not over $10,275 | 10% of taxable income |
| Over $10,275 but under $41,775 | $1,027.50 plus 12% of the excess over $10,275 |
| Over $41,775 but under $89,075 | $4,087.50 plus 22% of the excess over $41,775 |
| Over $89,075 but under $170,050 | $15,213.50 plus 24% of the excess over $89,075 |
| Over $170,050 but under $215,950 | $34,647.50 plus 32% of the excess over $170,050 |
| Over $215,950 but under $539,900 | $49,335.50 plus 35% of the excess over $215,950 |
| Over $539,900 | $162,718 plus 37% of the excess over $539,900 |
Tax Year 2022 Brackets for Married Filing Separately
| If your taxable income is: | Then, the tax due is: |
| Under $10,275 | 10% of the taxable income |
| Over $10,275 but under $41,775 | $1,027.50 plus 12% of the excess over $10,275 |
| Over $41,775 but under $89,075 | $4,807.50 plus 22% of the excess over $41,775 |
| Over $89,075 but under $170,050 | $15,213.50 plus 24% of the excess over $89,075 |
| Over $170,050 but under $215,950 | $34,647.50 plus 32% of the excess over $170,050 |
| Over $215,950 but under $323,925 | $49,335.50 plus 35% of the excess over $215,950 |
| Over $323,925 | $86,127 plus 37% of the excess over $323,925 |
Tax Year 2022 Brackets for Married Filing Jointly
| If your taxable income is: | Then, the tax due is: |
| Under $20,550 | 10% of the taxable income |
| Over $20,550 but under $83,550 | $2,055 plus 12% of the excess over $20,550 |
| Over $83,550 but under $178,150 | $9,615 plus 22% of the excess over $83,550 |
| Over $178,150 but under $340,100 | $30,427 plus 24% of the excess over $178,150 |
| Over $340,100 but under $431,900 | $69,295 plus 32% of the excess over $340,100 |
| Over $431,900 but under $647,850 | $98,671 plus 35% of the excess over $431,900 |
| Over $647,850 | $174,253.50 plus 37% of the excess over $647,850 |
Tax Year 2022 Brackets for Head of Household
| If your taxable income is: | Then, the tax due is: |
| Under $14,650 | 10% of the taxable income |
| Over $14,650 but $55,900 | $1,465 plus 12% of the excess over $14,650 |
| Over $55,900 but under $89,050 | $6,415 plus 22% of the excess over $55,900 |
| Over $89,050 but under $170,050 | $13,708 plus 24% of the excess over $89,050 |
| Over $170,050 but under $215,950 | $33,148.50 plus 32% of the excess over $170,050 |
| Over $215,950 but under $539,900 | $47,836.50 plus 35% of the excess over $215,950 |
| Over $539,900 | $162,218.50 plus 37% of the excess over $539,900 |
Other changes to note:
- The Qualified Canceled Mortgage Debt income exclusion is now reported on Form 982.
- Meal Deductions – You can continue to deduct 100% of the cost of business meals bought at a restaurant or food deliveries from a catering service. This provision will expire after tax year 2022 (taxes filed in 2023).
- Premium Tax Credit – Taxpayers with household income between 100% and 150% of the Federal Poverty Limit (FPL) for their family size are eligible for zero-premium coverage, depending on their selected plan.
- This credit is for taxpayers with household income over 400% of the FPL who contribute 8.5% of their household income toward their health coverage bought through the Federal Marketplace of State Exchanges. The enhanced Premium Tax Credit for those who have received unemployment no longer applies. Find out if you’re eligible for the Premium Tax Credit.
- Educator Expense Deduction – Secondary and elementary school teachers are allowed an adjustment to income of $300. Married educators are each eligible to deduct a total of $600. These amounts have increased due to inflation.
- Inflation Reduction Act Provisions – The Inflation Reduction Act introduced a number of deductions and credits for Medicare participants and taxpayers who purchase energy-efficient vehicles and appliances. The Inflation Reduction Act will be in effect starting tax year 2023. Learn more about the Inflation Reduction Act.
The following items are not in effect for tax year 2022
The following tax provisions were only in place through the 2021 tax year and expired on Dec. 31, 2021.
- Form 8885 – Health Coverage Tax Credit
- Private Mortgage Insurance Deduction (PMI)
- Tuition and Fees Deduction
- Certain business-related tax provisions
- Three-Year Depreciation for Race Horses
- Accelerated Depreciations on Property on Indian Reservations
- American Samoa Economic Development Credit
- Indian Employment Tax Credit
- Mine Rescue Team Training Credit
As always, TaxSlayer is here with resources to make the filing process quick and easy. Get prepared to file with our tax prep checklist!
How can I check the latest tax law updates?
For the latest tax news, keep tabs on the IRS website to find out about the newest tax law changes as soon as they are made available to the public!
