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Will tax refunds be bigger in 2023?

Tax season is here, and many are looking at lower returns, reduced tax credits and deductions, and more significant costs overall due to rising prices.

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JONATHAN ERNSTREUTERS

Tax season is here, and many of us are looking at lower returns, reduced tax credits and deductions, and more significant costs overall due to rising prices and heavier debt burdens.

On January 23, the Internal Revenue Service will begin taking tax returns for 2022 income, with refunds being distributed in the following weeks and months.

IRS Tax Refunds will be smaller due to COVID aid being slashed

“In 2023, taxpayers should count on receiving lesser tax returns than in previous years. Actually, some individuals may have tax arrears,“ Lynnette Khalfani-Cox, a financial advisor, recently told NPR.

She said that there were “four primary reasons why.” “One is to stop doing stimulation checks. In addition, the so-called “increased child credit” no longer exists.”

Khalfani-Cox also revealed that a specific pandemic-era tax exemption for charitable deductions was scrapped. Moreover, some investors may still have to pay taxes on investment gains at the end of a year marked by extreme volatility in the stock market. This is particularly true for shareholders of mutual funds that were forced to liquidate their holdings.

In what ways have there been modifications to the child tax credit?

Many families with two children under the age of six will not be eligible for the additional $3,200 in tax credits they received last year. This is because a family with two children under the age of six would only get a $4,000 tax credit this year, while in the previous tax season, they would have received a benefit of $7,200 because of pandemic legislation.

Using the Supplemental Poverty Measure, which was introduced a little over a decade ago, the United States Census Bureau estimated that the child tax credit and related pandemic policies reduced child poverty rates by “46% in 2021, from 9.7% in 2020 to 5.2% in 2021,” the lowest child poverty rate on record.

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