Child Tax Credit 2022
What is the Child Tax Credit?
The Child Tax Credit is a federal tax credit that reduces the amount of federal taxes owed by a taxpayer by $1,000 for each child under age 17. In 2017, this amount was increased to $2,000 per child under 17. This credit does have a phase-out amount when you reach $400,000 of adjusted gross income if you file married filing jointly, or $200,000 if you file single. This credit has been expanded multiple times, most recently during 2021 as part of the American Rescue Plan. Under the American Rescue Plan, the Child Tax Credit increased so that taxpayers would receive a credit of $3,600 for children under 6, and $3,000 for children 6-17.
In 2021, we saw another change to the Child Tax Credit. Many families received monthly payments of the credit in advance, instead of waiting for the credit as a refund at tax time. Taxpayers may have received monthly payments from July 2021 through December of 2021.
The 2021 Child Tax Credit payments are not taxable income – which means that you get the full amount of the refund, either in advanced payments from July-December of 2021 or as the credit when you file your tax return. This is a change from previous tax years, as only $1,400 of the credit was refundable if you did not owe a tax bill in prior years.
Reconciling Your Child Tax Credit for 2021
The amount of advanced Child Tax Credit that you received in monthly payments may not be the full amount that you are due, so you must reconcile the credit amount on your 2021 taxes. You will receive a letter from the IRS called letter 6419, which states the amount of advanced credit payment you received in 2021. If you’re unable to locate this letter, the IRS has set up a portal and a Child Tax Credit portal that you can utilize to check the amounts. You will need these amounts when filing for your 2021 taxes.
If you did not receive advance payments but are eligible for the Child Tax Credit, you will be able to claim the credit when filing your 2021 tax return.
Child Tax Credit vs Child and Dependent Care Credit
The Child Tax Credit and the Child and Dependent Care Credit are two different types of tax credits. The Child Tax Credit, as discussed above, is available to anyone with children under the age of 17.
What is the Child and Dependent Care Tax Credit?
The Child and Dependent Care Tax Credit is a credit available to help families reduce their taxable income to pay for the care of children and dependents while they’re working. This credit is adjusted based on your adjusted gross income and can be claimed if you have a child under 13 in care, a spouse that is unable to care for themselves, or other qualifying persons unable to care for themselves.
You may be eligible to claim both types of credits if you have qualifying children and paid for care during the 2021 tax year.
Will the Child Tax Credit Continue in 2022?
Will the Child Tax Credit be extended in 2022?
The Child Tax Credit will continue in 2022, just without the expanded measures from the American Rescue Plan. This means that the credit will revert to the previous amounts of $2,000 per child. This credit is also not being paid in advance as it was in 2021. The credit will also change back to the previous state where it is 70% refundable instead of fully refundable so a maximum of $1,400 can be collected in your tax refund if you don’t owe the government money at tax time.
If you have questions regarding the Child Tax Credit, contact us and let us know.
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