Overview
The tax year 2021 had a number of newsworthy tax breaks and other benefits to US taxpayers. Now, with the 2022 tax year approaching we though it a good idea to review which of those breaks/benefits no longer exist, which of those remain, but are substantially changed, and which of those remain with subtle changes.
Although there were congressional attempts at extending all or some of the expiring benefits, none were successful, and there does not appear to be any expectation of them re-appearing soon.
Stimulus/Economic Impact Payments/Recovery Rebate Credit
These are different terms for the same money from the US government which are not applicable for the 2022 tax year.
Child Tax Credit (and Additional Child Tax Credit)
The increased amounts, full refundability and advanced payments of the credit (mainly in cases of US residency), have not been extended, and therefore basically revert to the pre-2021 amounts and restrictions. Therefore, the maximum nonrefundable credit will be $2,000 for each eligible dependent child under age 17, and the credit will only partially refundable. (Please note that for most Americans living abroad there is no significant change.)
Child and Dependent Care Credit and Earned income Credit (EITC)
Again, neither are so newsworthy for Americans living abroad, but it’s worth noting that the Dependent Care credit will be non-refundable for 2022, and the expenses will be capped at $3,000 for one eligible child, and $6,000 for more than one. And the credit starts to phase out for families making only $15,000 a year. The EITC amounts and restrictions revert to pre-2021 status.
Kiddie Tax Changes
For 2022, the first $1,150 of a child’s (under age 19 or full-time student under age 24) unearned income is tax-free, and the next $1,150 is taxed at the child’s rate. The excess over $2,300 is taxed at the parent’s rate.
Tax Rates/Tax Brackets
While tax rates remain unchanged for 2022, the tax bracket amounts are changed slightly. As an example, for married filing jointly taxpayers with taxable income up to $20,550 the 10% tax rate applies. From taxable income of $20,551 to $83,550 the 12% rate applies. And from $83,551 to $178,150 of taxable income, the 22% rate applies. Rates continue to rise up to the maximum of 37%. Similarly, capital gains tax rates remain unchanged from 2021, but the brackets change slightly. For example, joint filers with 2022 taxable income up to $83,350 pay 0% on their capital gains, and those with taxable income between $83,351 and $517,201 pay 15% on their capital gains. Above that, the capital gains rate is 20%.
Note that Joint filers with modified Adjusted Gross Income above $250,000 are still subject to the 3.8% surtax on net investment income.
Foreign Earned Income Exclusion
The FEIE is being raised to $112,000 (from $108,700) per taxpayer for 2022.
Form 1099-K Changes
For those taxpayers who receive third-party settlement network payments (such as Paypal) for money received for goods and/or services for 2022, please note that anyone paying more than $600 is required to file and send a Form 1099-K.
Special “Non-Itemized” Charitable Donation Deduction
This is no longer available for individual or joint filers.
