Updated: Jan 4
How does that old saying go? “Congress giveth and Congress taketh away, …”
There are some tax breaks that had sunset provisions in them. In other words, Congress wanted to help out temporarily, but I want to emphasize that word… temporary.
The first will hurt families of young children, especially larger families. In 2021, the Child Tax Credit was $3,600 for each qualifying child under six and $3,000 for each qualifying child 7-17 years old. Starting in 2022, that credit drops to only $2,000 per child regardless of age and only through 16 years old. Bye! Bye!
The next also involves families with small children. The Dependent Care Credit. Before 2022, you could take a credit of up to $4,000 per child… as long as your household income was $125,000 or less. Any household income over that up to $400,000 reduced the maximum credit allowed. Now, for 2022 and beyond, the credit drops to $600 per child for married families with household income over $43,000. (The credit is larger if household income is under $43,000.) Oh bother! Child-care costs are going up, and now that poor strapped family, paying higher gas and food prices, gets a much smaller tax credit for dependent care expenses. Don’t you just love the timing of Congress? But wait! There’s more.
If you take the Standard Deduction, but are still charitable, you could deduct $600 as a married couple as well. Not in 2022 and beyond. No charity deduction for non-itemizers again. Now that is not charitable!
Here’s one to hurt the “rich.” If you are a large charity giver and itemize, you could give away up to 60% or your income to charities. Now it’s back to only 50%. Sure, high-end tax-payers will pay more tax since they will get a smaller charity deduction, but all the charities out there will probably see a drop in their total gift receipts. Now, does that really make it easier for that homeless shelter to provide for the increased homeless population?
Finally, one for all employed folks who have flexible spending accounts. (FSAs allow you to choose to have money deducted from your taxable income and used to pay for allowed special benefits, like child-care, specialty insurance plans, etc.) You can no longer amend the plan in mid-year to add participants. Also, you can not change allocations to various types of benefits in mid-year, only at the annual enrollment time. Dependent care expenses for children 14 and older no longer allowed to be paid out from an FSA. The maximum an individual can contribute to an FSA in one year just went from $10,500, back to $5,000.
Now, this is an election year. Those who are in power now, are feeling a bit concerned about loosing votes and getting kicked out of office. One way to “buy votes” would be to extend some or all of these sunsetted tax benefits, even create some new ones too? We shall see what Congress does this year.
Did you hear? Job 1:21b says, “The LORD gave, and the LORD has taken away, blessed be the name of the LORD.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.