Why Your Tax Refund Might Be Lower This Year
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Here's your Money Briefing for Wednesday, January 11th. I'm J.R.
What changes to COVID-era tax breaks could reduce my refund this year?
Whelan for The Wall Street Journal. When mapping out a household budget around this time of the year, people often work in their tax refund they expect when they file their returns. But make sure your pencil has an eraser on it, because that refund that padded your budget last year is likely to be smaller this year.
So it's possible for some people refunds could shrink by a few hundred to a few thousand dollars.
On today's show, we'll check in with our personal finance reporter, Ashley Ebling. She's been keeping tabs on tax changes kicking in in the new year. We'll dive into them after the break.
This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data. They want your identity. They want your innovation.
How much could my refund drop without enhanced child tax credits?
ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.
It's that time of year to start getting your tax paperwork together for your 2022 returns. But while the average American's refund has increased over the past couple of years, there are some key changes this year that could mean a lot of us getting a much lower refund this time around, or maybe even having tax due. WSJ personal finance reporter Ashleya Ebling has been going through the numbers, and she joins me now. Ashleya, thanks for being with us. Nice to be here. So, Ashleya, a lot of this has to do with COVID tax breaks. What happened to them, and where have they typically shown up on people's tax returns?
So as part of the year-end budget bill, Congress chose not to extend the COVID tax breaks, these tax breaks that were put in place at the height of the COVID-19 pandemic, such as enhanced child tax credits and extra special charitable deduction and even enhanced child and dependent care expenses. Those all show up on your tax return. And without those credits, people have smaller tax refunds or even possibly owe money.
So how much can people expect to see their refunds drop as a result?
So it's possible for some people refunds could shrink by a few hundred to a few thousand dollars. The amount will depend on taxpayers' situations, whether they've adjusted the amount they asked their employer to withhold in taxes and whether they paid estimated taxes throughout the year.
How do stimulus checks and recovery rebate credits affect 2022 refunds?
You know, a lot of people have enjoyed some pretty sizable refunds in the last year or two.
So last year was an anomaly in part because of the COVID tax breaks. The average refund was almost $3,200. That's up from an average refund of $2,800 the year before, which is more typical. There was still hope through year end that some of these breaks would be extended. So in that sense, it is new. And people who receive refunds in recent years may now even have a balance due.
All right. Now there are some other scenarios where people might see a significant change in their refund as compared to the past few years. How about people who got stimulus checks last year?
So that's a big ticket item. Most taxpayers who receive their 2021 stimulus checks, they got them automatically. But some people got the money as a recovery rebate credit on their 2021 income tax returns. That's $1,400 per person.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:39
2
What changes to COVID-era tax breaks could reduce my refund this year?
0:39–1:17
3
How much could my refund drop without enhanced child tax credits?
1:17–3:06
4
How do stimulus checks and recovery rebate credits affect 2022 refunds?
3:06–4:07
5
Will state rebate payments be taxable on my federal return?
4:07–5:29
6
How did the child tax credit revert for 2022 and what should parents do?
5:29–6:42
7
What changed for the child and dependent care credit and charitable deduction?
6:42–7:46
8
How can I adjust withholdings or actions now to avoid surprises next year?
7:46–8:16
Speakers
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