Nothing stays the same and taxes are no exception. Every single year, the IRS changes things up. It’s in your best interest to take a few minutes and review the new tax laws for 2022 that will come into play when you work on your 2021 tax return so you’ll know if they’re going to significantly impact your ability to successfully file a tax return. The sooner you look at the new tax laws, the more time you have to make adjustments before you’re required to submit your return on April 15.
Depending on your situation, there are two major new tax laws that could significantly alter the results of your 2021 tax return.
Child Tax Credit
The 2022 tax law change that will have the biggest impact on most Americans is a change the IRS has made to the child tax credit. It’s anticipated that this particular change will positively impact about 90% of the Americans who currently claim a standard deduction.
One of the biggest changes in IRS history is how the IRS started sending the child tax credit to qualifying families each month. It made a big difference to some families who were struggling to make ends meet.
The issue you may not be aware of is that the monthly credit could significantly impact how much you owe when you file your taxes in 2022. Anyone who received monthly child tax credits throughout 2021 will receive a Letter 6419 from the IRS that will provide detailed information about the payments you received and help you understand how this will impact you when you file your 2021 tax return.
Changes to Charitable Donations
In the past, you had to itemize all of your charitable contributions if you were using them for a tax break. One of the big changes is that you now can deduct up to $300 in cash donations that you made to registered non-profit organizations. No itemization is needed.
While you don’t have to itemize your cash donations when filing your 2021 tax return, that doesn’t mean you shouldn’t. If you made more than $300 in cash donations, taking the time to itemize means you can claim those donations for up to 100% of their adjusted gross income. This is a huge change since the deduction has previously been limited to just 60%.