Why You Might Receive a Smaller Income Tax Refund in 2023
- Written By Thomas J. Brock, CFA®, CPA
Thomas J. Brock, CFA®, CPA
Investment, Corporate Finance and Accounting Expert
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.
Read More - Edited By
Savannah Pittle
Savannah Pittle
Senior Financial Editor
Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.
Read More - Published: January 30, 2023
- 2 min read time
- This page features 5 Cited Research Articles
Oftentimes, receiving an income tax refund from the Internal Revenue Service (IRS) or other taxing body is a pleasant surprise. Unfortunately, the IRS advises most taxpayers to expect a smaller refund in 2023 as compared to recent years. The key reasons are outlined below.
No Special Stimulus Payments for 2022
Unlike 2020 and 2021, there are no special economic stimulus payments for 2022. As a result, holding all else constant, the average taxpayer can expect a higher federal income tax obligation (and a smaller refund) due to the stimulus phase-out.
Some 2022 Tax Credits Are Reverting to Pre-COVID-19 Levels
The most notable reversions relate to the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC) and the Child and Dependent Care Credit.
For example, if eligible, filers who got $3,600 per dependent for the CTC in 2021 will only get $2,000 for the 2022 tax year.
For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will only get $500 in 2022.
For 2022, the Child and Dependent Care Credit will return to a maximum of $2,100, instead of the $8,000 granted in 2021.
The IRS provides a comprehensive breakdown of other potential tax breaks.
No Above-the-Line Charitable Deductions for 2022
Following the COVID-19 outbreak, taxpayers could take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations.
Closing Thoughts
The IRS advises that some 2022 returns will take longer to process than others, which is typical when it’s in an understaffed position (the norm for several years). The IRS provides in-depth coverage of what’s new, in addition to an array of online tools and resources to help facilitate the filing process.
