Filing your 2022 taxes: Why your refund may be smaller

CNN
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Official tax-filing season kicks off Monday, January 23, and it may hold some surprises for your wallet.

So, whether you expect to file your 2022 federal income tax return right away or wait until the last minute, now is a good time to get a sense of whether you’ll owe more money to the IRS, or whether you’ll likely get a refund and if so, how much.

Here’s why: The amounts might be very different than they were last year. Several popular tax breaks have changed since you filed your 2021 return. And your financial circumstance may have altered too, if you sold any assets or were laid off.

If it turns out you will owe additional money to the IRS, and need some time to get the funds together, “You still can file but set your payment to go on April 18,” said Kathy Pickering, chief tax officer at H&R Block. (If you pay later than April 18, you may be subject to penalties and interest.)

Most Americans get a federal tax refund every year, and for many that refund is a big boon to their finances.

But that boon may be smaller this year, in part due to the expiration of some tax-break enhancements that were in effect the previous tax year.

Child tax credit: For tax year 2022, parents may claim a maximum child tax credit of $2,000 for each child through age 16 if your modified adjusted gross income is below $200,000 ($400,000 if filing jointly). Above those levels, the credit starts to phase out. And the portion of the credit treated as refundable — meaning it is paid to you even if you don’t owe any federal income tax — is capped at $1,500, and that is only available to those with earned income of at least $2,500.

But that’s well below the now-expired enhanced child tax credit that was in effect for 2021. Among other things, it was fully refundable with no earned income requirements, Pickering noted. And the enhancements let parents claim a maximum credit of $3,600 for every child under age 6 and up to $3,000 for children ages 6 through 17.

Child and dependent care credit: The tax credit that working parents use to help pay for child care or that filers claim to pay for the care of an adult dependent is also notably lower for tax year 2022. That’s because Congress let the 2021 enhancements to it expire.

On your 2022 return, for example, you…