Barbara O’Neill, Ph.D., CFP®, AFC®
Martie Gillen, Ph.D., MBA, AFC®, CFLE
It’s officially income tax season and tax returns for tax year 2022 (1/1/22- 12/31/22) are due on April 18, 2023. Many taxpayers are now receiving- and organizing- W-2 forms for salary income, 1099 forms for a wide variety of income sources (e.g., self-employment, royalties, pensions and annuities, dividends, interest, government payments, and Social Security), and other documents needed for tax preparation.
Now is also a good time to review changes in federal income tax law between 2021 and 2022. Below is a brief summary of 2022 tax law changes for Personal Financial Managers to share with military families:
Charitable Gifting
- Taxpayers who are unable to benefit from itemized deductions and, therefore, claim the standard deduction can no longer deduct contributions to qualified charities as they could in 2020 and 2021. Only those who itemize can deduct cash contributions up to 60% of adjusted gross income (AGI).
Child Tax Credit
- In 2021, under the American Rescue Plan, the child tax credit (CTC) was expanded for income-eligible families with children. The CTC amount was $3,600 for qualifying children under age 6 and $3,000 for older qualifying children under age 18. The CTC returned to $2,000 for 2022 taxes.
Earned Income Tax Credit
- Enhanced EITC benefits in 2021 for taxpayers without a qualifying child (i.e., younger workers and senior citizens) no longer apply in 2022. Therefore, to claim the EITC without a qualifying child, taxpayers must have been at least age 25 and under age 65 by the end of 2022.
Mileage Deduction
- To reflect the rising cost of gasoline and vehicles, the mileage deduction for business use of a personal vehicle during 2022 rose to 62.5 cents per mile from July through December, up from 58.5 cents per mile from January through June. Mileage for vehicle use for charitable purposes remained at 14 cents per mile throughout 2022, an amount unchanged since 2020.
Standard Deduction
- Indexed for inflation annually, the 2022 standard deductions were $12,950 for single taxpayers and married couples filing separately, $19,400 for heads of household, and $25,900 for married couples filing jointly. Blind taxpayers and those age 65+ received an additional $1,400 standard deduction.
Terminology Change
- “Qualifying surviving spouse” is the new name for the tax filing status that was previously called “qualifying widow/widower,” starting in 2022. The same tax rules apply to surviving spouses, however, without any changes due to the new name.
Format Change
- There are new lines on Form 1040 and 1040-SR (for older adults). In addition, some items previously found on Form 1040 are now found on Schedule 1. Bottom line: taxpayers must be careful when comparing 2021 and 2022 tax returns side-by-side.
For additional information, review the IRS instructions for IRS tax form 1040.
Join us for our 2023 Tax Updates webinar where you can earn free continuing education credits and discover what service providers need to know to support military families this tax season.
Photo by Nataliya Vaitkevich on pexels
