When it comes to tax season, there's really only one thing most of us look forward to: the possibility of a tax refund. But many refunds may not be as high as last year due to tax rule changes and the end of stimulus programs.
"There are people who need the things I no longer need," said Kim Davis, who makes annual Goodwill donations.
But the bins at her local Goodwill were mostly empty because charitable donations no longer give most taxpayers a tax break, unlike last year.
Goodwill's Michael Flannery said cars dropping off donations "would be lined up around the building" around New Year's Day.
"Because everyone wanted to get that receipt for their taxes so they could get the deduction," he said.
He said with the loss of the deduction, "That's not going on now."
Changes that could mean a smaller refund for you
Not being able to take a deduction for that used clothing you donated is just one change that taxpayers will see this year. According to experts, the move could lead to a slightly smaller tax refund.
Mark Steber ofJackson Hewittsaid refunds will look a lot more "normalized" compared to refunds issued last year.
"Just be prepared for some refund volatility or, perhaps, in a real-world context, some refund shock," Steber said.
According to the IRS, the average refund in 2022 was more than $3,200. That was up from $2,800 in 2021.
But this year, Steber said refund amounts are more likely to mirror refunds from 2019 or 2020.
The biggest reason is that Congress did not issue federal stimulus checks in 2022, which many people collected at tax time. In addition, Congress in 2021 gave families a boost with the expanded Child Tax Credit, which has since expired.
It's not all doom and gloom, with many more tax credits to take advantage of, Steber said.
"There are dependent care credits, education credits, and that list goes on and on," he said. "So, if you're in one of those, especially new this time, you may get a bigger refund than you got last year."
What you can do
Steber says the best thing to do is:
- Get your tax records organized now.
- Enter your charitable donations, in the event you can itemize deductions and still deduct them.
- File early.
- File electronically.
Flannery said Goodwill needs donations, even if you can no longer claim clothing and household goods as tax deductions.
So keep giving to those in need, as you work on your taxes, so you don't waste your money.
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