The 2022 Tax Return Changes: What You Should Know

For many Americans, 2020 was one of the most complicated tax seasons of all time. Now that most people have filed their annual income taxes for the past year, it’s time to start looking forward. Congress has passed multiple changes that will impact how Americans should file their taxes in 2022. Some are temporary, and others are permanent, but all of them are worth learning about how to avoid sticky situations come next April.

The Best Way to Avoid Missed Tax Benefits

By far the best way for people to avoid missing deductions or credits is to work with qualified tax accountants. These experts make it their job to keep up with legislative changes that impact filing status and pride themselves on ensuring that every client gets the most out of his or her tax return. Given what’s at stake in 2022, it’s well worth the money to hire an accountant to make sure no one misses out on the following deductions and credits.

Deductions for Charitable Contributions

For the 2021 tax year, all Americans will be able to claim a $300 charitable deduction. In previous years, only filers who itemized deductions were eligible to claim it, but now, the option is also available to those who don’t itemize. There’s a second chance, as well. Now, married couples can deduct up to $600 when they file jointly, while in 2021, the limit was set at $300 per return.

Medical Deductions

While the deductions for charitable contributions for non-itemizing filers are temporary, the changes in how medical deductions work are permanent. Now, there’s a lower threshold for deducting medical expenses that reverts back to the pre-2017 level. Every American taxpayer can deduct unreimbursed medical expenses in excess of 7.5% of their income, while before, they could only deduct expenses that exceeded 10% of their total income. Also unlike the altered deductions for charitable contributions, those who want to claim 100% of their medical deductions must itemize.

Business Meals Deductions

It used to be the case that businesses and self-employed contractors could only deduct 50% of the cost of their business meals. For 2021 and 2022, that deduction goes up to 100%. The primary purpose of this temporary change in the tax code is to help restaurants that have suffered as a result of the COVID-19 pandemic. However, business owners and the self-employed can certainly benefit from deducting 100% of the meals they purchase at restaurants while traveling for business or entertaining clients.

Tax Breaks for Educational Expenses

Until last December, the tax code was a bit confusing on the subject of tax deductions for tuition and related educational expenses. Now, things have gotten less convoluted. The government has expanded income limits for the lifetime learning credit starting in 2021, making the up-to- $2,000 per tax return credit more accessible. Before these changes, families often took deductions when they would have saved more money taking educational credits. Now, it’s much more clear that the credit will directly reduce the amount of tax they owe.

The Bottom Line

Like 2020, 2021 may prove to be one of the more complicated tax years in recent history for average Americans. Don’t be left unprepared when the 2022 tax filing season rolls around. Learn more about the relevant changes and schedule an appointment with a qualified accountant to discuss what kind of impact they will have on the family’s finances now to avoid missing out on any deductions or credits.