2021 is finally behind us. It’s time to look ahead to 2022. You may have made some resolutions about smart spending and sticking to a budget. Follow this blog for strategies to address debt and check out our free resource for more tips and tricks.
It’s never too early to start thinking about taxes. In the coming weeks, we will all start receiving our tax forms. Those expecting refunds will try to file as quickly as possible while those who owe will take their time. There were a number of quirks in 2021 that could result in smaller refunds. Some may be surprised to owe taxes for 2021. Here are some of the changes:
Student Loan Pause:
As a result of the pandemic, many student loans were paused. There were a number of extensions, including one last month suspending loan payments until May 1, 2022. This benefitted many borrowers but it also means they will lose out on a possible student loan interest deduction. That deduction, capped at $2,500, reduces gross income and creates a smaller tax obligation.
Advance Child Tax Credit:
Many parents received money each month from July to December of 2021. That represented an advance of one-half of the child tax credit. In prior years, that credit came off your taxes and was up to $2,000 per child. For those who already received that credit for the second half of the year (up to $1,800 for a child under 6 years old), they can now only claim the other half (for the beginning of the year). Remember, a credit reduces the amount of taxes owed so you may not receive that full credit when you file taxes.
Unemployment Benefits:
In 2020, unemployment income up to $10,200 was not subject to federal income tax. Many states followed suit, including New York. As of this writing, that does not appear to be the case. For now, unemployment income is taxable. If you did not withhold taxes from your unemployment benefits you may find yourself owing taxes (or receiving a smaller refund).
Whatever happened in 2021 is in the past. Hire a knowledgeable accountant that can find every possible deduction and credit to minimize any tax obligation or maximize a refund. This is the best time to start planning for 2022. Wishing you a happy, healthy, and debt-free New Year!
Zimmelman Law PLLC
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