Thanks to a tax refund that is more than $300 more than in 2021, many taxpayers will have extra spending money this year. If that sounds like a lot, it’s because of federal relief programs that helped American families last year.
According to the IRS, the average federal income tax refund as of April 8, 2022, is $3,226, up from $2,893 at the same time in 2021. That’s an increase of 11.5 percent, which is more than the current rate of inflation.
Because late filers often get smaller refunds or owe money, some experts predict that once all of the returns are reviewed, the average refund will drop.
However, due to the impact of last year’s enhanced Child Tax Credits (CTC), this tax season may be an exception, according to USA Today. From $2,000 in 2020 to $3,600 in 2021, the credit for children under the age of six has increased.
In 2021, parents with children aged 6 to 16 will receive a raise from $2,000 to $3,000 per child, up from $2,000 the previous year. In 2021, households could get up to $3,000 for 17-year-olds.
What does this mean in terms of greater reimbursements this year?
Whether or not you received a monthly advance CTC in 2021 will determine a lot. From July through December, advance payments of up to $250 were provided to each kid aged 6 to 17, or $300 to each child under the age of 6.
Households who received advance payments will be able to claim the remaining credit on their 2021 tax returns. Depending on how much you owe, you may be eligible for a refund.
Meanwhile, taxpayers who did not receive advance CTC payments can claim the entire credit as a lump sum while filing their taxes, boosting their refunds in 2022 compared to their refunds in 2021.
The Earned Income Tax Credit (EITC), which was expanded in 2021 for employees without children and extended to include non-student dependents 19 and older, may have also influenced your refund. Previously, the benefit was only available to low-income taxpayers without dependents aged 25 to 64.
Because of an American Rescue Plan provision that allows you to utilize your 2019 income to calculate your EITC payment if it was higher than your 2021 income, some taxpayers may have received larger refunds this year. According to the IRS, this choice may result in a larger refund for some taxpayers.
Simply put, don’t expect higher refunds in the future. Unless Congress extends legislation to improve the CTC, EITC payments, or other COVID-era relief programs, tax returns for 2023 will likely be reduced, according to USA Today.