The IRS has warned that 2023 tax refunds may be smaller due to changes in tax laws affecting tax brackets, standard deductions, and credits. Taxpayers are urged to review their withholding allowances, make estimated tax payments, and seek advice to avoid surprises. Staying informed is key to minimizing financial impact.
According to the IRS, if you anticipate receiving a tax refund in 2023, it might be less than it was this year.
Usually, you receive a federal refund if you underpaid your annual taxes or withheld more money than you should have.
Your annual balance is based on your taxable income, which is determined by deducting from your adjusted gross income the greater of your itemized or basic deductions.
Those who qualified might receive outstanding monies on their tax return this year. The agency granted the third wave of stimulus grants worth $1,400 per person in 2021.
On of October 28, the IRS reported that the average refund for the 2022 filing season was $3,176, up nearly 14% from $2,791 in 2021.
2022's charitable deduction is "less robust" than 2021's
The IRS added that it will be more challenging to deduct charitable contributions on your 2022 return.
The explanation is that, according to certified financial planner Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, "deductions for charitable gifts in 2022 are not as robust as 2021."
Congress provided a tax cut for cash donations in 2020 as a response to the COVID-19 outbreak, and lawmakers extended the tax holiday for 2021.
Since 2018, the standard deduction has increased, making it more challenging to itemize deductions and hence lose the tax benefit for charitable giving. The standard deduction or itemized deductions, whichever is higher, are the options given to filers.
Nonetheless, regardless of whether you itemize for 2021, you can deduct up to $300 for cash donations or $600 for married couples filing jointly.
But, the tax break was not extended for 2022, so if you take the standard deduction, there is no longer an advantage for charitable gifts, according to the IRS.
