New Tax Season Brings Surprising Changes: Reduced Child Tax Credits, Eliminated Charitable Deductions, and Automatic Inflation Adjustments

The tax season officially began on January 23, and while there haven’t been any major changes in tax policy, automatic inflation adjustments mean some people may pay less in taxes this year. However, families with children may see smaller federal returns than last year as the child income tax credits have gone back to their 2020 levels, according to a report by The Providence Journal on January 24, 2023.

Special tax credits, such as those for unemployment and health insurance, have also been removed. Additionally, the charitable deductions for cash donations without itemizing have been eliminated. One of the biggest reductions is the federal child tax credit, which was increased in 2021 to a maximum of $3,600 per dependent, but has now gone back down to its 2020 level of $2,000.

At the state level, parents with children making less than $100,000 a year should have received a $250 check for each child, up to $750 for three children, as part of the budget passed in June 2022. However, families who did not receive the checks but believe they were eligible should contact the Department of Revenue directly, according to a report by Yahoo on January 25, 2023.

Overall, taxes are due on April 18 and changes for taxes this year and next include increased standard deductions, retirement account contribution limits, and higher tax brackets. These changes are a result of high inflation and are mandated by law. It is important to consult with a certified public accountant to determine whether to take the standard deduction or try to itemize in order to get the most tax benefit.