2022 TAX UPDATES
Big tax breaks were enacted for the 2021 tax year by the American Rescue Plan Act, which was signed into law in March 2021. But most of those tax law changes expired at the end of 2021. As a result, the child tax credit, child and dependent care credit, earned income credit and other popular tax breaks are different for the 2022 tax year than they were for 2021.
Child Tax Credit
As a result, the child tax credit reverts back to its pre-2021 form for the 2022 tax year. That means the 2022 credit amount drops back down to $2,000 per child (it was $3,000 for children 6 to 17 years of age and $3,600 for children 5 years old and younger for the 2021 tax year). Children who are 17 years old don’t qualify for the credit this year, because the former age limit (16 years old) returns. For some lower-income taxpayers, the 2022 credit is only partially refundable (up to $1,500 per qualifying child), and they must have earned income of at least $2,500 to take advantage of the credit’s limited refundability. And there will be no monthly advance payments of the credit in 2022.
Child and Dependent Care Tax Credit
By way of comparison, the 2021 credit was worth 20% to 50% of up to $8,000 in eligible expenses for one qualifying child/dependent or $16,000 for two or more. The percentage decreased as income exceeded $125,000. When you combine the top percentage and the expense limits, the maximum credit for 2021 was $4,000 if you had one qualifying child/dependent (50% of $8,000) or $8,000 if you had more than one (50% of $16,000). The credit was also fully refundable in 2021.
For 2022, the child and dependent care credit is non-refundable. The maximum credit percentage also drops from 50% to 35%. Fewer care expenses are eligible for the credit, too. For 2022, the credit is only allowed for up to $3,000 in expenses for one child/dependent and $6,000 for more than one. When the 35% maximum credit percentage is applied, that puts the top credit for the 2022 tax year at $1,050 (35% of $3,000) if you have just one child/dependent in your family and $2,100 (35% of $6,000) if you have more. In addition, the full child and dependent care credit will only be allowed for families making less than $15,000 a year in 2022 (instead of $125,000 per year). After that, the credit starts to phase-out.
Recovery Rebate Credit
There are no stimulus check payments in 2022. As a result, there is no recovery rebate credit for the 2022 tax year.
Tax Brackets
| Tax Rate | Taxable Income (Single) | Taxable Income (Married Filing Jointly) | Taxable Income (Head of Household) |
| 10% | Up to $10,275 | Up to $20,550 | Up to $14,650 |
| 12% | $10,276 to $41,775 | $20,551 to $83,550 | $14,651 to $55,900 |
| 22% | $41,776 to $89,075 | $83,551 to $178,150 | $55,901 to $89,050 |
| 24% | $89,076 to $170,050 | $178,151 to $340,100 | $89,051 to $170,050 |
| 32% | $170,051 to $215,950 | $340,101 to $431,900 | $170,051 to $215,950 |
| 35% | $215,951 to $539,900 | $431,901 to $647,850 | $215,951 to $539,900 |
| 37% | Over $539,900 | Over $647,850 | Over $539,900 |
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