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Tax Day 2022: 10 Tax Changes That Could Impact the Size of Your Refund

If you haven't filed your return yet, you should know about these key tax changes.

tax-changes
Naomi Antonino/CNET

This story is part of Taxes 2022, CNET's coverage of the best tax software and everything else you need to get your return filed quickly, accurately and on-time.

It's almost tax day -- federal tax returns are due April 18 this year. If you haven't filed yet, there's still time to file quickly online (our picks for best tax software can help). Knowing how tax changes and increased tax breaks may affect your tax refund can be helpful as you start your return.

Last year was full of tax changes -- from the standard deduction and tax bracket increases to extensions and enhancements of 2020 tax provisions, like the expanded child tax credit. While there's a lot of tax legislation to keep track of, this list can help prepare you to maximize your tax refund this year.

If you haven't filed your 2021 tax return yet, here are the most important tax changes to keep in mind.

1. The standard deduction is higher

The standard deduction -- which is the amount you can decrease from your income before tax is applied -- increased. For your 2021 tax return, the standard deduction is now $12,550 for single filers (an increase of $150) and $25,100 for married couples filing jointly (an increase of $300). For heads of households, the standard deduction is now $18,800 (an increase of $150). These increases are inflation adjustments. 

2. Income tax brackets were raised

Income tax brackets were also raised to account for inflation. Your income bracket refers to how much tax you owe based on your adjusted gross income, which is the money you make before taxes are taken out, excluding itemized exemptions and tax deductions.

While the changes were slight, if you were at the bottom of a higher tax bracket in 2020, you may have bumped down to a lower rate for your 2021 tax return.

2021 income brackets for single filers

Taxable income Federal tax rate
$9,950 or less 10%
$9,951 - $40,525 $995 plus 12% of income over $9,950
$40,526 - $86,375 $4,664 plus 22% of income over $40,525
$86,376 - $164,925 $14,751 plus 24% of income over $86,375
$164,926 - $209,425 $33,603 plus 32% of income over $164,925
$209,426 - $523,600 $47,843 plus 35% of income over $209,425
$523,601 or more $157,804.25 plus 37% of income over $523,600

2021 income tax brackets for married, joint filers

Taxable income Tax bracket for married, filing jointly
$19,900 or less 10%
$19,901 - $81,050 $1,990 plus 12% of income over $19,900
$81,051 - $172,750 $9,328 plus 22% of income over $81,050
$172,751 - $329,850 $29,502 plus 24% of income over $172,750
$329,851 - $418,850 $67,206 plus 32% of income over $329,850
$418,851 - $628,300 $95,686 plus 35% of income over $418,850
$628,301 or more $168,993.50 plus 37% of income over $628,300

Rates for heads of household and married filing separately were also raised. You can view all the changes on the IRS website.

3. You won't owe taxes on forgiven student loans

If you were able to get all or some of your student loans forgiven in 2021, you're no longer subject to taxation on the forgiven amount. Prior to the American Rescue Plan, signed into law in March 2021, forgiven student loan balances were added to your income for the year and taxed accordingly.

But now, a new stipulation prevents forgiven post-secondary education loans from being taxed through 2025. This law has not yet been extended beyond that, but it might be. 

4. The charitable donation deduction increased

On your 2020 tax return, a temporary provision of the CARES Act allowed for up to a $300 deduction per tax return for charitable giving, even if you don't itemize your taxes. For your 2021 tax return, this benefit has expanded to up to $300 per person. This means if you're married and filing jointly, you could be eligible for up to a $600 deduction for charitable donations. 

 You can search for eligible organizations with the Tax Exempt Organization Search tool on IRS.gov.

5. Required minimum distributions were reimplemented

Once you reach age 72, you're legally required to start making withdrawals from tax-advantaged retirement accounts like 401(k)s and traditional IRAs. These required withdrawals are called required minimum distributions, or RMDs, and they're subject to income tax.

The 2020 CARES Act waived RMDs for IRAs and retirement plans for that specific tax year, essentially offering a tax break to those 72 or older. But RMDs were required in the 2021 tax year, which means if you're over 72, you were supposed to make a withdrawal from your retirement account before the end of 2021. 

If you're in that age group and did not withdraw the required amount (see the IRS website to calculate your minimum requirement), you may owe a 50% excise tax on the money you failed to withdraw. 

6. The earned income tax credit increased

Designed to benefit people with lower incomes, this tax credit can reduce your taxable income and wages. The American Rescue Plan expanded and increased this credit for the 2021 tax year. 

If you meet the income requirements, here's what you could claim for the EITC:

Earned Income Tax Credit for 2021

If you have You can claim up to
No qualifying children $1,502
One qualifying child $3,618
Two qualifying children $5,980
Three or more qualifying children $6,728

7. The child tax credit was expanded

Similar to the EITC, the child tax credit is designed to benefit working families by allowing them to claim a credit per qualifying child. The American Rescue Plan also increased the amount families could claim in 2021 to $3,600 per child under age 6 and from $3,000 for children age 6 and over (previously this credit was $2,000 per child 16 or under). The credit was also made fully refundable, meaning the amount is refunded to the taxpayer regardless of how much the taxpayer's liability is. 

If you received advance payments during the second half of the 2021 year, you can use Letter 6419 to claim the balance you're owed when you file your tax return this year. If you did not receive the advance payments for whatever reason (some families opted out), you can claim the full amount of the credit when you file.

8. The unemployment benefits tax break was not renewed

The American Rescue plan provided a temporary tax break for those who received unemployment benefits in 2020. That legislation allowed up to $10,200 (for single filers) of unemployment benefits to be considered tax-free on your 2020 tax return. This tax break was not renewed, which means if you collected any unemployment benefits in 2021, they are subject to full taxation when you file this year.

9. Health flexible spending contributions increased

If you have a health flexible spending account, or FSA, good news: The limit for tax-free contributions has increased to $2,850 -- up $100 from last year. 

10. Tax-deductible medical expenses increased

Some medical expenses are tax-deductible -- and Congress approved a more generous allowance for what you can deduct. Instead of capping expenses that exceed 10% of your adjusted gross income, as was originally planned for 2021, you can now deduct medical expenses that exceed 7.5% of your AGI. 

This means if you make $50,000, you can deduct qualifying medical expenses that exceed $3,750 for the 2021 tax year. This provision was made permanent at the end of 2020.