Latest News, Local News, International News, US Politics, Economy

In 2022, the Internal Revenue Service (IRS) May Want to Give You Money!

Even if you haven’t qualified in previous years, if you paid for daycare, health insurance, or your child’s college tuition in 2021, you may be eligible for a large credit on your 2021 taxes.

Under pandemic-relief legislation, the number of credits has been expanded for the 2021 tax year, but they will become more restrictive in the 2022 and 2023 tax years. Not only are many of them more generous this year than in previous years, but they’re also available to more taxpayers who were previously disqualified due to their income, age, or other factors.

Because credits lower a tax burden dollar for dollar, they are significantly more beneficial than deductions. Deductions lower taxable income and are normally only beneficial if they exceed the standard deduction, which is $12,550 for single filers and $25,100 for couples in 2021.

Many people are already aware of the American Rescue Plan’s extended child tax and recovery rebate credits for 2021. The child tax credit was doubled to $3,000 per child under the age of 17 from $2,000, plus an additional $600 for children under the age of 6. The stimulus credit for 2021 will be $1,400 per person. The IRS followed up with mailings in the mail after these credits were partially paid out last year. There’s a lot of debate about how to claim them properly on your 2021 tax returns.

But, warns Mark Luscombe, a chief federal tax analyst at Wolters Kluwer, don’t allow these well-publicized tax credits to overshadow a slew of lesser-known ones. “When the tax code is modified or new provisions are added, many people do not claim what they are entitled to.”

Here are five credits—along with a single deduction that can be claimed in addition to the standard deduction—that can help you lower your tax bill in 2021:

In 2022, the Internal Revenue Service (IRS) May Want to Give You Money! (1)
In 2022, the Internal Revenue Service (IRS) May Want to Give You Money!

Credit for child and independent care

Only for the 2021 tax year, the maximum child and independent care credit were increased to $4,000 from $1,050 for a single kid and to $8,000 from $2,100 for two or more children.

Furthermore, because the income level for 2021 taxes is more than eight times higher, more taxpayers will be able to claim the entire credit: When adjusted gross income reaches $125,000, the credit begins to taper off gradually. The benefit began to phase out on incomes of $15,000 in the previous tax year.


However, there is some bad news for high-earners. The credit was never tapered out to zero in previous years; anyone earning more than $400,000 might claim a credit for 20% of their qualified costs. For incomes over $438,000, the credit is now totally phased out.

The credit is for taxpayers who need to pay for child care to work, look for jobs, or go to school. A kid under the age of 13 is considered a dependent, as is anyone under the age of 13 who is incapable of caring for himself.

According to Luscombe, taxpayers must have the taxpayer-identification numbers for their daycare providers to claim the credit. “If you had a lot of different babysitters, you might have a record-keeping issue.”

Credit for health insurance premiums

While the health insurance premium credit was established for low-income taxpayers years ago, the American Rescue Plan, which was passed in March of last year, abolished income limits for the 2021 and 2022 tax years.

In 2022, the Internal Revenue Service (IRS) May Want to Give You Money! (2)
In 2022, the Internal Revenue Service (IRS) May Want to Give You Money!

Individuals or couples who purchase health insurance through one of the Affordable Care Act’s exchanges are eligible for the credit.

Depending on a taxpayer’s income and premium costs, the credit will vary. The credit may be sufficient in 2021 to ensure that your premium payments do not exceed 8.5 percent of your household income.

According to the Kaiser Family Foundation credit calculator, the annual premium for a healthcare plan for a couple earning $150,000 with three children could be $14,443, or 9.6% of income. This family would be eligible for a $1,683 tax credit, bringing their annual costs down to $12,750, or 8.5 percent of their income.

Higher education tax credits:

Consider your eligibility for two education credits if you’re paying for college tuition and fees. The bad news is that you must choose between the two options; you cannot utilize both for student expenditures.

The American opportunity tax credit, which is available to couples with incomes up to $180,000 and singles with incomes up to $90,000, is the most accessible. It covers the costs of degree-seeking students who are enrolled at least half-time in classes and is limited to $2,500 per student. The credit covers 100% of expenses up to $2,000 and 25% of the additional $2,000 in expenses.

Read More:- Getting Paid Update on the $1,400 Stimulus Check – Are You One of the 640,000 People Who Owe Money From Their 2021 Tax Return?

Another alternative is the lifetime learning credit, which is worth up to $2,000 per tax return and equals 20% of annual education expenses up to $10,000. Couples can earn up to $138,000, while singles can earn up to $69,000. In 2020, their ceilings were $118,000 and $59,000, respectively. This credit can be used to defray costs associated with undergraduate and graduate school, as well as courses to improve employment skills.

The earned-income tax credit (EITC) is a tax benefit that is given to people

The earned-income tax credit, which benefits working taxpayers, was nearly increased for individuals without dependents for the 2021 tax year, and qualifying conditions were also relaxed.

Taxpayers without dependent children could only claim this credit if they were between the ages of 24 and 65 before 2021. According to Luscombe, this meant that a grandmother over 65 caring for a grandchild could not claim the earned-income tax credit.

Read More:- A One-time Stimulus Cheque Worth $500, $375, or $250 in Tax Refunds Will Be Distributed to Millions of Taxpayers in This State

This is modified for the 2021 tax year: anyone aged 19 or older, whether or not they have dependent children, can claim the credit if their incomes fall below particular criteria as part of pandemic-relief efforts.

The credit limit and income limits for a household vary based on the number of dependent children.

For the 2021 tax year, the benefit for taxpayers without children was increased from $538 to $1,502. Couples must earn no more than $27,380, and individuals must earn no more than $21,430 to be eligible.

Read More:- Stimulus Update: Do You Have Your Third $1,400 Stimulus Check Yet? This Is How Your Taxes Are Filed!

When a taxpayer has three or more children, the credit has increased to $6,720 from $6,660 and is available if their combined income is less than $57,414 for couples and $51,464 for singles.

Another modification for 2021: taxpayers can choose to base this credit on their 2019 income if it is higher than in 2021. As a result, the credit amount may be increased.

Deductions for cash contributions have been increased.

Normally, charitable contributions can only be deducted if you itemize your deductions rather than taking the standard deduction. However, if taxpayers don’t itemize and instead claim the standard deduction, the Taxpayers Certainty, and Disaster Relief Act, passed in December 2020, allows them to deduct up to $300 in cash gifts—or $600 per couple—on their 2021 taxes.

Leave A Reply

Your email address will not be published.