www.electrofiletax.com Tax Changes for 2022
ElectroFile Income Tax Service   Income Tax Service
5200 W Market St
Greensboro, NC 27409
  Terry Hough, President Terry Hough

January 12, 2023
Tax Changes for 2022

This article provides information on recent tax changes for 2022 federal tax provisions affecting most taxpayers’ Tax Year 2022 returns.

Federal Tax Provisions that No Longer Apply for 2022 Federal Tax Returns

Since Congress did not pass legislation that extended the following federal tax provisions that expired at the end of 2021, they are NOT applicable for 2022 federal tax returns:

Individual Tax Provisions that No Longer Apply

  • Non-itemizer charitable cash contributions deduction ($300 addition to standard deduction)
  • Mortgage insurance premiums no longer qualify as mortgage interest on Schedule A
  • The Self-Employed Credit for Sick and Family Leave (Form 7202)
  • Credit for Health Insurance Costs for Eligible Individuals
  • Credit for Two-Wheel Plug-in Electric Vehicles

Business Tax Provisions that No Longer Apply

  • Employee Retention Credit
  • Indian Employment Tax Credit
  • Accelerated Depreciation for Business Property on Indian Reservations
  • Three-Year Depreciation for Racehorses Two Years or Younger
  • American Samoa Economic Development Credit
  • Mine Rescue Team Training Credit
  • Credit for Production of Indian Coal

Tax Provisions that Revert to Pre-2021 Rules

Unless Congress passes legislation, the following provisions have reverted to the rules that applied in 2020:

Child Tax Credit

  • The Child Tax Credit is $2,000 for each qualifying child with $1,500 eligible to be refundable as the additional child tax credit.
  • The age limit for a qualifying child is under the age of 17.
  • The advance of the Child Tax Credit is no longer applicable for Tax Year 2022.

Child and Dependnt Care Credit

  • This credit is nonrefundable.
  • Maximum qualifying expenses are $3,000 for one qualifying person and $6,000 for two or more qualifying persons.
  • Maximum percentage is 35% for taxpayers with $15,000 or less of AGI. Percentage gradually decreases for AGI between $15,000 and $43,000 until it reaches 20%.

Earned Income Tax Credit for Taxpayers Without Children

Qualifications and limits are what they were before 2021 as follows:

  • Taxpayer must be at least age 25 and under age 65 at the end of 2022
  • AGI cannot be greater than $16,480 ($22,610 for MFJ)

Changes to Form 1040, line 1 (Wages and other related earned income)

The IRS has expanded line 1 on the Form 1040 to show what were formally write-in amounts on separate lines on Form 1040. Form 1040, line 1 is now broken down as follows:

  • Line 1a Total amount from Form(s) W-2, box
  • Line 1b Household employee wages reported on Form(s) W-2
  • Line 1c Tip income not reported on line 1a
  • Line 1d Medicaid waiver payments not reported on Form(s) W-2
  • Line 1e Taxable dependent care benefits from Form 2441, line 26
  • Line 1f Employer-provided adoption benefits from Form 8839, line 29
  • Line 1g Wages from Form 8919, line 6
  • Line 1h Other earned income
  • Line 1i Nontaxable combat pay
  • Line 1z Total of lines 1a – 1h

Form 1040, line 1d Medicare Waiver Payments

Medicare waiver payments should be entered on line 1d if they were received by the taxpayer and they chose to include them in their earned income for purposes of claiming a credit or other tax benefit and they were not reported to the individual on a Form W-2.

Other Earned Income Reported on Form 1040, line 1h

Form 8919 is used to report uncollected Social Security and Medicare Tax on Wages. The amount that must be reported on line 1h of the Form 1040 is the total wages that the individual received for which no social security tax or Medicare tax was withheld and not reported on Form W-2.

Other earned income that must be reported on Form 1040, line 1h are:

  • Excess elective retirement plan deferrals
  • Disability pensions that are shown on Form 1099-R, if an individual had not reached the minimum retirement age set by their employer.
  • Corrective distributions from a retirement plan shown on Form 1099-R of excess elective deferrals and excess contributions (plus earnings).
  • Strike or lockout benefits

See the following on the IRS website for more information on the 2022 Form 1040:

Inflation Reduction Act Provisions

The following provisions that were included in the Inflation Reduction Act go into effect in 2022.

Energy Efficient Home Improvement Credit

Previously known as the   Nonbusiness Energy Property Credit , this credit was renamed the Energy Efficient Home Improvement Credit under the Inflation Reduction Act of 2022. The credit was extended to cover years 2022 – 2032.

For 2022, the old rules and limits that applied under the Nonbusiness Energy Property Credit apply as follows:

  • The credit rate is 10% of the total qualifying costs for the year.
  • The lifetime limit of $500 for the credit applies. This covers all qualifying expenditures for years 2006 – 2022.
  • As part of the total lifetime limit, there is a $200 limit for windows.
  • For 2022, there is a total cost limit for each of the following:
    • $50 for any main air circulating fan
    • $150 for any natural gas, propane, or oil furnace or hot water boiler
    • $300 for any other item of energy efficient building property.
  • Credit is only allowed for the taxpayer’s main home.

For more details, see the   2022 Form 5695 (Residential Energy Credits) instructions .

For 2023 – 2032, the following new rules and limits go into effect as follows:

  • The credit rate is increased to 30% with an annual limit of $1,200 per taxpayer ($2,000 for heat pumps and biomass stoves).
  • Replaces lifetime cap on credits with a $1,200 annual credit limit, including $600 for windows, $500 for doors and $600 for each item of other qualified energy property.
  • Increases limit to $2,000 for heat pumps and biomass stoves.
  • Removes eligibility on roofs.
  • Credit is available for residential solar, wind, geothermal, and biomass fuel property.
  • Allows a 30% credit (up to $150) for home energy audits.
  • Credit is allowed on any dwelling owned by the taxpayer.

For more details, see the   IRS FAQs about energy efficient home improvements and residential clean energy property credit   on the IRS website.

Alternative Fuel Vehicle Refueling Property Credit

  • Taxpayers are eligible for a credit of up to $1,000 for residences and $30,000 for businesses for the cost of any qualified alternative fuel vehicle refueling property installed by a business or at a taxpayer’s residence for Tax Years 2022 – 2032.
  • The credit is the lesser of 30% of the costs or $30,000 for businesses or $1,000 for residences.
  • Qualifying property will now include bidirectional charging equipment and the credit can be claimed for electric charging stations for two- and three-wheeled vehicles that are intended for use on public roads.
  • Beginning in 2023, charging or refueling property will only be eligible if it is placed in service within a low-income or rural census tract.

Plug-In Electric Drive Vehicle Credit for 2022

  • The new Clean Vehicle Credits for qualifying electric and fuel cell vehicles do not go into effect until 2023.
  • For 2022, the rules that were in effect before the enactment of the Inflation Reduction Act for qualifying electric vehicles apply. This includes the manufacturing caps on vehicles sold.
  • A qualifying new electric vehicle that was purchased after August 16, 2022 must have had its final assembly occur in North America.

Read more about the   Top Refundable Credits in the Inflation Reduction Act .

Tax Year 2022 Annual Tax Deduction Changes and Reminders

The following are the federal items that change each year, mainly for adjustments to inflation, and reminders of provisions that have only been enacted in the past couple of years.

2022 Standard Deduction

  • $12,950 – Single/Married Filing Separate
  • $25,900 – Married Filing Joint/Qualifying Widow(er)
  • $19,400 – Head of Household

Standard Mileage Rates for 2022

  • Business: 58.5 cents per mile (Jan – June); 62.5 cents per mile (July – December)
  • Medical/Moving: 18 cents per mile (January – June); 22 cents per mile (July – December)
  • Charitable purposes: 14 cents per mile

Deduction of Business Meals

  • 100% for 2022

Charitable Contribution for Taxpayers who do not itemize

Taxpayers who do not itemize can no longer take a charitable contribution of $300.

Taxpayers who do not itemize can no longer take a charitable contribution of $300.

New Reporting Requirements for Third Party Network Transactions   Delayed Until 2023

The IRS announced on   December 23, 2022   that they will consider 2022 to be a transition year for implementing the new lower threshold for when a third-party network must report the payments for income from goods and services.

The requirement began in 2022 and originally required individuals who received $600 or more in income from goods and services from a third-party payment network, such as Venmo, Cash App, or Zelle, to receive a   Form 1099-K   (Payment Card and Third-Party Network Transactions) in January of 2023.

The requirement to receive a Form 1099-K for income of $600 or more via third-party payment networks was a result of a provision included in the American Rescue Plan Act of 2021, which lowered the reporting threshold from $20,000 to $600 and removed the 200 minimum transaction threshold.

The IRS, by making 2022 a transition year, has essentially delayed the implementation of the lower reporting threshold until 2023. This means that most individuals who received less than $20,000 in income via a third-party payment network will not receive a Form 1099-K for 2022.

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All information provided is general in nature and intended to create awareness, not to address the specific circumstances or concerns of any individual or entity. Although we try to provide correct and timely information, we cannot guarantee the accuracy of any information or that such information will continue to be accurate in the future due to the changing nature of the tax laws. Before acting on any of the information provided here, you should consult with a professional advisor who knows all of the unique facts and circumstances pertinent to your particular situation.