January 21, 2022

How 2021 Covid-19 Aid Could Affect Your Finances in 2022

Much of the Covid-19 aid provided to individuals by the federal government was disbursed during 2020 and 2021, but it could still affect your finances in 2022.

The third stimulus check, changes to unemployment insurance, the interruption of federal student loans and the increased child tax credit were all part of the government’s aid package last year. Apart from the lending break, none of the other measures will apply in 2022 (at least until now).

But they could affect your tax bill this year, and many families’ returns could be smaller than normal as result. Here’s what to keep in mind about Covid-19 aid in 2022.

Advance child discount

The improved children’s discount has not been extended until 2022, but the payments for 2021 will still affect your tax bill.

The credit was increased from a maximum of $2,000 to a whopping $3,000 to $3,600 per child in 2021. Many families received half the larger payment by 2021 in monthly installments of as much as $250 to $300 per child. Everyone will receive the other half (and families who have opted out of advances will receive the full amount of the credits) when they file their 2021 tax returns.

In general, many families received much more money. But because, for the first time, half of the payment was made up front, families could get a smaller tax refund than they’re used to.

For example, a family with a 10-year-old who qualified for the full $3,000 could have received $1,500 in 2021. That means they can claim the extra $1,500 on their tax returns — less than the $2,000 they usually claim. With more children, the difference becomes even greater.

In addition, the CTC was based on income data for 2020. If a parent or household’s income is much different in 2021, they may have to repay some of the credit.

Unemployment Insurance

The Democrats’ US bailout excluding federal taxes up to $10,200 in unemployment benefits per person for 2020. But for 2021, no comparable benefit is offered — so far. Filers will have to pay tax on the benefits as usual.

Unemployment has risen significantly since the start of the coronavirus outbreak. but around 25 million people were still claiming unemployment benefits sometime in 2021. If they haven’t withheld any or all of their tax deductions, they may owe a portion of that tax season.

Stimulus Controls

A bit of good news: those who qualify for the third coronavirus stimulus check, who was paid out last year but never received, could finally get their payment when they file their 2021 taxes.

The payments were worth up to $1,400 for each eligible individual and their family members. Those who did not receive one, or received less than they should have, can claim the Credit for recovery discount on their returns for 2021. This even applies to people who normally don’t file a tax return.

The third payments were initially based on 2019 income to speed up the payout process, although technically they should be based on 2020 income. Earned too much to qualify, but lost income in 2020.

However, there may still be people who are eligible for the check who have not received it or have received too little. For example, if an eligible person had a child in 2021, they can now make that dependent on their 2021 tax return.

The tax authorities are send a letter about the stimulus payments to taxpayers at the end of January, which can be used to find out if they qualify for more money.

Those who earned less in 2019 than they did in 2020 owe the IRS none of the incentive money.

Student loan break

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