Updated: Feb 1
Well, it’s a new year with new tax law changes. Most of the “temporary” stimulus – related easings have ended on December 31, 2021. Whether you are happy about it or not, Senator Manchin has pretty much killed the “Build Back Better” bill, which included a LOT of tax law changes, most NOT favorable to taxpayers. In that bill were some tax breaks too. Can we expect Congress to try again with a new bill in 2022? It’s an election year, so it is expected that many Democrats who voted for the “Build Back Better” bill in 2021 are afraid to be associated with much of it’s provisions in an election year. Can Nancy Pelosi get enough Democrats to vote for something new? We shall see.
One item that many will feel the change to is the Child Tax Credit. It reverts back to the pre-2021 rules. That means no more monthly payments. In addition, the maximum credit goes back to the lower $2,000 per child under the age of 17. (In 2021, it jumped up to $3,000 per child under the age of 18 and if a child was 6 years or younger, the credit was even higher… $3,600. All of the credit in 2021 was fully refundable. Now in 2022, it drops back to only $1,500 is refundable and that only for low-income taxpayers. The Democrats was to bring back the 2021 rates, but Senator Manchin once again wants some limits to only lower income folks. We shall see in the next 3-4 months if there looks like any movement on this has legs.
Another tax credit that changes back to a lower number in 2022 is the Earned Income Credit. It was temporarily higher for folks who didn’t have any children.
Finally, the Child And Dependent Care Credit for working parents really drops. In 2021, it was $4,000 for one child and $8,000 for two or more, with higher income phase-outs. Now for 2022, it drops back down to $1,050 for one child and $2,100 for two or more children with lower income phase out rules. Now, my mind jumps to the unfairness of limiting this credit to a maximum of two children. What about many families who have 3 or more children in child care. Congress is saying you are bad and shouldn’t have been so “productive.”
One other tax break in 2020 and 2021 was the $300 deduction for Charitable Contributions is you take the Standard Deduction and don’t itemize. Now in 2022, that has gone away.
There are more tax law changes. I’ll go over them next week.
Did you hear? Psalms 102:26 says, “They will perish, but you will remain; they will all wear out like a garment. You will change them like a robe, and they will pass away.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.