How can you make the most of the new tax credits?
What low-income taxpayers need to know for the 2022 Tax Filing Season.
With the IRS releasing new guidance on the Earned Income Tax Credit and new changes for the 2022 filing season, the nation is on track for another chaotic tax season. There are several deductions, child tax credits, premium tax credits, and an Earned Income Tax Credit that low-income taxpayers should know about when filing their taxes this year.
Legal Aid Service of Broward County provides free legal assistance to eligible residents of Broward and Collier Counties who are low-income taxpayers. While the organization does not prepare or file tax returns, Miguel Cardona, a Qualified Tax Expert with the Low-Income Taxpayer Clinic, has provided answers to some Frequently Asked Questions.
1. Did you receive a third Economic Impact Payment (EIP)?
If no EIP was received, or it was not the correct amount, you can now claim it as a Recovery Rebate Credit on line 30 of Form 1040/1040 SR.
2. Do you have children? There’s an Advanced Child Tax Credit
The American Rescue Plan Act of 2021 increased the amount of Child Tax Credit and made it refundable for tax year 2021 only. The new amounts are $3,000 for qualifying children between ages 6 to 17 years old at the end of 2021 and $3,600 for qualifying children ages 5 and under at the end of 2021.
§ Note: Taxpayers may have received up to 50% of their Child Tax Credit in advance monthly payments between July – December 2021
3. Have you made any Charitable Contributions throughout the year? You could qualify for deductions.
Taxpayers that take the standard deduction as opposed to itemized deductions will be able to deduct $300 or $600 if married filing jointly, for cash contributions made to qualifying charities during 2021.
4. Is your annual income above 400% of the Federal Poverty Line? You may be eligible for a Premium Tax Credit.
The federal poverty line for 2021 ranges from $12,760 to $44,120 depending on your family size. For 2021, the law now allows for expanded eligibility for the Premium Tax Credit for households with annual income above 400% of the Federal Poverty Line.
5. Are you eligible to receive an Earned Income Tax Credit (EITC)?
- More workers without qualifying children can qualify for EITC since the age limit has changed:
- Taxpayer must be at least 19 years old as of December 31, 2021(down from 25)
- There is no age limit (prior age was 64)
- Qualified former foster youth or qualified homeless youth can qualify for EITC if they were at least 18 years old as of December 31, 2021
- Specified students can qualify for EITC if they were at least 24 years old as of December 31, 2021
- Taxpayers may receive investment income of up to $10,000 and still be eligible for EITC (up from $3,650).
- Taxpayers who have qualifying children but cannot provide their social security number are still eligible for EITC as single EITC but the taxpayer must have a social security number.
To Learn more about Legal Aid Service of Broward County’s Low-Income Taxpayer Clinic, visit: browardlegalaid.org/low-income-tax-payer