Passed in 1997 as part of the Taxpayer Relief Act, the federal child tax credit has undergone several changes over the years. The most sweeping overhaul of the tax provision was applied to the 2021 credit that families with children could claim.
However, in the face of outright GOP opposition to President Biden and the Democrats’ Build Back Better plan, and the absence of Sen. Joe Manchin’s crucial 50th vote to pass the legislation in the Senate, a powerful anti-poverty measure and a major tax cut for millions of Americans thanks to the improvement of the child tax credit has expired. Families will still be able to claim up to $2,000 per year until 2025, but there will be more restrictions on who is eligible for credit.
How does the child tax credit for fiscal year 2022 work?
Before the expansion and strengthening of the child tax credit in the spring of 2021 as part of the US bailout, the last revision of the tax code in 2017, the Tax Cut and Jobs Act (TCJA) doubled the credit to $2,000 per child. This will be the amount that eligible taxpayers with children under the age of 17 at the end of 2022 will be able to claim when filing their taxes next year, minus any last minute surprises. Democrats are still pushing to pass an extension of the 2021 changes, and there have been talks with Sen. Mitt Romney about an alternative monthly payment of $350.
Who can claim the 2022 child tax credit?
The TCJA returned $1,400 per child of the refundable credit, so that if a taxpayer owed less than the amount, it would be added to their tax refund. This is called the Additional Child Tax Credit (ACTC), but there are eligibility limits to receive both minimum and maximum income credit.
A filer claiming the credit would need to earn at least $2,500 to begin qualifying for the credit. Above this income floor, a taxpayer can claim 15% of their taxable income, then subtract the credit from any taxes they owe. If the amount of credit they can claim is greater than the amount of tax they owe, that excess amount would be added to their refund.
At the upper end, the credit is being phased out for single taxpayers with incomes over $200,000 and married couples filing jointly with adjusted gross income over $400,000. The credit decreases by 5% for every $1,000 increase, or fraction thereof, in earnings.
To request a refund of the credit, taxpayers must complete Schedule 8812 and attach it to his tax return.
Additional tax credits for children and dependents
For each dependent who is not eligible for the child tax credit, taxpayers may be eligible for a $500 credit for other dependents. These may include certain dependents aged 17 or over, including dependent parents or other family members. As well as dependents living with a taxpayer but not related. This tax credit is non-refundable and begins to gradually disappear for individuals earning more than $200,000 per year and $400,000 for joint declarations.
Taxpayers will want to check the IRS’ online tool to determine if their child or dependent is eligible for the child tax credit or the credit for other dependents. The agency also provides another online tool to see who is considered a dependent.
Similarly, in addition to the Child Tax Credit and the Other Dependent Credit, taxpayers can claim the Earned Income Tax Credit. This provision is a refundable tax credit that targets low- and middle-income workers.
Taxpayers who incur expenses to care for young children or dependents while they work can also claim the child and dependent care credit. The IRS will reimburse you for a portion of the cost of the services and expenses related to the services provided.