2022 tax refunds up with stimulus, credits
Tax season is a bit less painful for many taxpayers this year, thanks to larger than average refunds.
Tax refunds are averaging $3,226 so far this tax season. That’s 11.5% higher than last year, according to data from the IRS.
Could it be a mistake? Probably not. Instead, there are a few legitimate reasons IRS refunds are bigger this year.
A more generous Child Tax Credit boosted refunds for some taxpayers. In 2021, the credit increased to $3,600 per child under age six from $2,000 per child in 2020.
Parents of children aged 6 to 16 also received an increase in 2021 to $3,000 per child, up from $2,000 in 2020. Taxpayers in 2021 were also able to receive up to $3,000 for 17-year-olds.
How the credit impacts your refund depends on whether you took advantage of the monthly advance of up to $250 per child ages 6 to 17 or $300 for each child under 6.
Families that received the payments, which started in July and ended in December, can file for the remainder of the credit on their 2021 tax returns. Depending on how much they owe, the credit could trigger a tax refund.
Taxpayers who did not receive advanced payments can claim the entire credit as a lump sum when they file.
If you opted for advanced payments and are claiming the same credits as last year, your refund should roughly mirror last year’s, said Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities.
“It’s important to remember that even for people who claimed the advanced CTC payments, it’s not that their refunds are smaller on an annual basis, it’s that they already received half of their CTC refund in advance last year,” Cox added.
The Earned Income Tax Credit, or EITC, was expanded in 2021 for workers without children and extends eligibility to dependents 19 and older (excluding students). The credit previously was limited to low-income taxpayers ages 25-64 without dependents.
Another potential refund booster is a result of a rule passed in the American Rescue Plan that allows taxpayers to use their 2019 income to compute their EITC payment if it was higher than their income last year.
Under the American Rescue Plan, depending on your income, you could be eligible for up to $1,400 if you’re a single filer or $2,800 if you’re married and filing jointly. Single and joint filers also are eligible for an additional $1,400 per dependent including adult dependents.