Before COVID-19 permanently altered the economy, it was already challenging to keep up with the tax code. It’s more difficult than ever to determine what to anticipate when you submit your tax return after several years of stimulus payments, extended filing deadlines, and tax advantages tied to the epidemic.
Earned Income Tax Credit
A tax credit targeted toward people with lower incomes is called the Earned Income Tax Credit (EITC). To expand the pool of taxpayers who are eligible for the EITC during the 2021 tax year, the American Relief Act was passed in 2021. However, the stricter pre-pandemic EITC requirements are back in effect for the 2022 tax year, so even if you were eligible for the EITC last year, you might not be this year.
Since the beginning of the pandemic, Americans have not received federal stimulus funds in the tax year 2022. Stimulus checks weren’t regarded as taxable income, so you could use them to pay costs without moving up a tax rate. Without the stimulus payments that kept you afloat in 2020 and 2021, it might be more difficult for you to find the money to make up the difference if you owe money overall this year.
Increased Tax Bracket
People in the lowest income bracket pay a 10% tax rate on their relatively low taxable income, while those in the top percentile pay a 37% tax rate on their relatively substantial taxable income. Congress increased the tax brackets at the end of 2021 for the 2022 tax year, which may mean you are now in a separate tax bracket than you were the previous year. Changing tax brackets doesn’t necessarily result in a lesser return, but you should anticipate some form of adjustment. In addition, this year’s inflation forced many Americans to pursue side jobs to survive reports Yahoo Finance.
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