Whether you’re preparing to file, waiting on a refund, or have already paid your tax bill, you might notice some differences this year.
First of all, many taxpayers are noticing smaller refunds or higher tax bills this year than in the previous two years. That’s because many pandemic relief programs have ended or decreased, leading to a higher tax burden for many people.
Additionally, the 2022 standard deduction increased to $25,000 for married filing jointly, an $800 increase from last year. It also increased $400 for single taxpayers (now up to $12,950) and $600 for head of household (up to $19,400.) For many taxpayers, it makes more sense to take the standard deduction because it results in a higher deduction than if they itemize. Make sure you calculate your itemized deduction before you choose which one to take.
The child and dependent care credit also changed. In 2022, if your AGI was over $43,000, you could take 20% of the credit. If you had a maxed-out dependent care credit, however, then you are ineligible for this credit. See more information on the IRS website here.
Also note that there was an above-the-line deduction for charitable donations the past two years, but there is not one for 2022. The Qualified Business Income Deduction is still in effect, and you can click here to see if you qualify.
Here are some other changes that might impact your taxes this year:
Solar Panel Tax Credit Extension
The Federal Residential Clean Energy Property Credit, also known as the solar panel tax credit, allows taxpayers to claim a percentage of the cost of a solar PV system they installed during that tax year. This solar panel tax credit reduces how much you owe in income taxes based on how much you paid for your qualifying solar PV system.
This credit was recently extended through 2034. For 2022-2032, Congress set the credit at 30 percent the cost of installation. That number will decrease to 26 percent for 2033, 22 percent for 2034, and it will expire in 2035 unless Congress renews it.
There is no maximum limit for how much can be claimed. As far as roofing goes, only solar roofing tiles or solar roofing shingles apply.
Electric Vehicle Tax Credit
If you purchase a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) during or after 2023, you may qualify for the clean vehicle tax credit. This credit is up to $7,500, and is set to expire in 2032 unless renewed.
This credit is available for both individuals and their businesses.
There are some qualifications, including:
- You must use the vehicle for your own use;
- Your adjusted gross income must not exceed $300,000 for married couples filing jointly, $225,000 for heads of households, or $150,000 for all other filers. (You can use your modified AGI from the year you purchase the vehicle or the year before, whichever is less;)
- You must purchase the vehicle new;
- The vehicle must be made by a qualified manufacturer;
- The vehicle’s suggested retail price (MSRP) cannot exceed $80,000 for vans, sport utility vehicles and pickup trucks, or $55,000 for other vehicles. For example, a Tesla Model 3 would technically apply for this credit right now, but a Tesla Model S or Model X would not. (due to the vehicle’s MSRP.)
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