Now that tax season is here, it’s time to take a serious look at steps you can take to trim your tax bill–while still being cognizant of the fact that some tax credits and deductions are being reduced.
Let’s take a look at the current rules related to tax credits you may be able to take advantage of on your 2022 tax return:
- The Child Tax Credit (CTC): If you received $3,600 per dependent in 2021 for the CTC will, you will at a maximum get $2,000 for the 2022 tax year.
- The Earned Income Tax Credit (EITC): If you do not have children, you may have received this credit of up to $1,502 in 2021. You may now be eligible for only $560 on your 2022 return.
- The Child and Dependent Care Credit returns to a maximum of $6,000 in 2022 instead of $8,000 in 2021.
When it comes to the current tax year, The Inflation Reduction Act (IRA) was recently passed which contains several notable tax credits which may apply to your freelance taxes in 2023:
1. Credits for energy-efficient purchases including new and used electric cars. The new law has a extensive tax credits to support energy-efficiency and climate preservation measures including:
- Increasing the $500 lifetime tax credit limit for qualifying energy-efficient improvements to a residence is increased to an $1,200 annual tax credit.
- Eliminating the manufacturing limit on qualifying electric vehicles, (currently this applies to General Motors, Tesla, Lexus, and Toyota electric vehicles) for the credit which used to be in place.
- Claims of the electric vehicle credit to Adjusted Gross Income (AGI) limits of $300,000 for married, $225,000 for head of household and $150,000 for single filers are enacted.
- There is an available electric vehicle credit for used electric vehicles of 30% or $4,000, whichever is lower, with AGI limits of $150,000 for married, $112,500 for head of household and $75,000 for single filers.
Clearly, if you have been thinking about purchasing an electric vehicle, then now may be the time to do it based on the tax incentives available this tax year. These are just a few of the new tax regulations to be aware of, although tax credits like the ones detailed here are key to reducing your tax bill beyond the standard deduction.
Stay tuned this tax season for more updates on tax credits and other ways that you may be able to reduce your tax bill in 2022 and beyond.