By Karen Hube
March 20, 2023
If you bought an electric car, installed energy-efficient windows or racked up college-related expenses last year, you are among taxpayers who may qualify for tax-saving credits or deductions on your 2022 taxes.
Overall, the landscape of credits and deductions will seem meager to many 2022 filers. Refunds are expected to be smaller this year, because most pandemic-era expanded tax credits expired in 2022.
For example, the maximum child tax credit for 2022 is $2,000 per child under age 17, down from a maximum $3,600 in 2021. The maximum child and dependent tax credit to offset child care costs for working parents dropped to $3,000 for one child or $6,000 for two or more kids in 2022 from $8,000 and $16,000 in 2021. The ability to take a charitable deduction of up to $300 for singles and $600 for couples, even while claiming the standard deduction, has fallen away.
But there are still a number of credits and deductions that can help taxpayers nip and tuck their 2022 tax bills.
A $7,500 federal tax credit for buying electric or plug-in hybrid vehicles was in effect in 2022, but eligibility depends on the model and the timing of your purchase.
A manufacturer’s sales cap was in effect in 2022, making some vehicles ineligible for part or all of the credit. Once 200,000 vehicles of a certain type were sold, the credit began to phase out.
Popular models, such as all Tesla EVs and Chevrolet Bolts, exceeded the 200,000 sales cap in 2019, so by last year the credit had completely phased out. If you bought one of those models last year, you can’t claim the credit on your 2022 return.
Some models hit the cap in 2022. For example, if you bought the Toyota RAV4 Prime plug-in hybrid before Oct. 1, you may claim the full $7,500 credit. If you bought one on or after Oct. 1, the credit drops to $3,750.
Battery capacity is also key to how much of the credit you may claim. The credit starts at $2,917 for a vehicle with a battery capacity of 5 kilowatt-hours, and grows by $417 for each additional kWh, up to $7,500.
To find out if your vehicle qualifies for any or all of the credit, check out the Internal Revenue Service’s list.
But there’s more to the 2022 eligibility requirements. The EV tax credit rules changed on Aug. 16 under the Inflation Reduction Act, requiring that, effective immediately, only vehicles assembled in North America qualify for the credit.
This immediately disqualified popular models by Hyundai, Mazda, Kia, Volkswagen and other car makers. To check if your EV fulfills the assembly requirements, go to the Department of Energy site.
If your EV doesn’t meet the assembly requirements but you signed a contract to buy it before Aug. 16 and it was delivered later, it is eligible for the credit.
Clean Energy Upgrades
Window, door and skylight installations in 2022 that improve the energy efficiency of your home may qualify you to claim the energy efficient home improvement credit of $500. The credit rises to $1,200 for 2023.
Costs for other energy upgrades, such as the installation of solar panels, solar powered heat pumps, wind turbines or geothermal heat pumps can be offset with the residential clean energy credit equal to 30% of your purchases and installation costs.
Health savings accounts (HSAs), which allow assets to grow tax-free if they are used for qualified healthcare expenses, have another perk that shouldn’t be missed for 2022: Any contributions to your account, other than by your employer, are deductible. You don’t have to itemize deductions to claim a deduction for your contributions, which means the deduction is allowable even when claiming the standard deduction.
Student Loan Interest
In a continuation of pandemic-relief policies, payment requirements on federal student loans were paused in 2022 and interest was set at zero for the year, so for many borrowers there is no student loan interest to claim as a deductible expense in 2022.
But if your loan is held by a private lender and you paid interest, brush up on the deductibility rules. You can deduct up to $2,500 in 2022 student loan interest—even if you claim the standard deduction—as long as your modified adjusted gross income is less than $175,000 if you are married filing jointly or $85,000 if you file as single or head of household.
Two credits are designed to offset secondary education costs. You can only claim one, even if you are eligible for both.
The American opportunity tax credit can be claimed for the first $2,500 of qualified expenses for the first four years of postsecondary education. If you have multiple dependent students, you may claim a credit for each. The full credit may be available for single taxpayers with modified adjusted gross income of less than $80,000 and joint filers with income of less than $160,000. It phases out when income reaches $90,000 and $180,000, respectively.
The lifetime learning credit can offset 20% or up to $2,000 in qualified expenses annually through graduate school and has the same income cutoffs. Only one credit is possible per tax return, even if you have multiple dependent students.
If you own your own business and file a schedule C, restaurant business meals are 100% deductible for 2022. For 2023 taxes, the deductibility cap returns to its pre-2020 level of 50%.
If you log miles for work as a schedule C filer, crunch numbers to determine the best way to claim car expenses. You can claim a deduction for miles driven or vehicle expenses such as for gas, oil, registration, repairs and depreciation—but not both.
If you deduct for mileage driven, take note of a rate change beginning on July 1. For the first half of 2022, qualifying business travel can be deducted at 58.5 cents per mile, and at 62.5 cents in the second half.
“Normally there’s one rate for the entire year, but because of inflation the IRS increased the rate starting July 1,” says Mark Luscombe, principal federal tax analyst at Wolters Kluwer. “People will have to separate business miles into two time periods and apply a different rate to each.”
Write to firstname.lastname@example.org