Child Tax Credit 2022: How Much can You Get?

The Child Tax Credit 2022 is a federal tax credit that helps parents with children under the age of 17 to provide for their families. The Child Tax Credit is available every year, even if you don’t have any tax liability in that year. So it’s a great way to reduce your overall tax burden. To find out how much benefit you would receive, use our free online calculator. It will show you how much money your income qualifies you for and how much of that you would actually receive in taxes.

It was after the Covid-19 Pandemic that affected the entire world financially. This was when most Americans had to choose between a paycheck and parenting. It was during this time that many children under the age of 18 went under the poverty line. To deal with this the 2021 Child Tax credit reform was put into form. According to this, it allowed the parents to receive a specific credit irrespective of whether they paid their taxes for the year 2019 or 2002.

According to the American Rescue Plan Act, the Child Credit expanded as a part of the stimulus package that was worth $1.9 Trillion and was approved in the March of 2021 by US president Joe Biden. The best part is that the dependent tax credit had been predicted to benefit low-income families and to bring about a certain degree of control over poverty by half. Under this act, American families with low to moderate income were also provided with extra cash, as a form of financial assistance. But one has to bear in mind that to qualify for the Child Tax credit there has to be a certain income cut-off.

The below table displays the individuals who can receive the complete payment of $3600 with the payment decreased by $50 for every $1000 of the income above these limits:

These are the payments that have been phased out exclusively for the single taxpayers who earn up to $240000, and the joint filers earning up to $440000.

However, this is not a new policy; in fact, it was first introduced in the year 1998 when the amount was capped at $400 per year. Eventually, the credit amount increased up to $36000 by the year 2021. Also, the age of the child to qualify for the same was extended to 17 years.

Read More: What is Recovery Rebate Credit and How to Claim it in 2022

What are the Benefits of the Child Tax Credit

There are various advantages of the Child Tax Credit. Some of the prime benefits include:

• The families receive a $3000 tax credit for every child who is 17 years older or younger.
• The families receive $3600 for children under the age of six.
• The payments are usually distributed in advance via monthly payment methods. 
• The best part is that the parents don’t have to owe taxes to receive the credit. 
• The credit received is completely refundable.

Who Qualifies?

Generally speaking, taxpayers are eligible to claim the Child Tax Credit for the year 2022 tax year as and when they file their tax returns in 2023. However, there are ‘seven’ stages of qualification that one needs to take care of:

• The Age: The child in question must be 17 years of age at the end of 2022.
• The Relationship: The child in question must be your daughter, son, stepchild, Foster child, Sister, Brother, half-brother, half-sister, step-brother, step-sister or a descendant of any of the above people.
• Residency: The child in question must stay with you for a minimum of six months. However, there are a few specific exceptions to the rule.
• Income: There are certain income requirements that the Parents or the primary caregivers cannot exceed. This is because, as much as your income exceeds the threshold, the credit is reduced until it is eliminated.
• Financial Support: It is mandatory that the Parents or the caregivers should have provided a minimum of half the child’s support during the last year.
• Dependent Status: It is one of the most important aspects, that the child must be related to you and must be ‘dependant’. Also, keep in mind that the child cannot file a joint tax return unless it is filed to claim a refund of the withheld income taxes or the estimated taxes paid.
• Citizenship: The child must be a US citizen, US national or US resident Alien. Also, the child must bear a Social security Number.

Note: In case there is a child or a relative you care for but fails to meet the criteria for the CTC but can be claimed as a dependent by you, then you are also eligible for a $500 non-refundable credit which is known as ‘credit for other dependents.’ The details for the same can be claimed at the IRS website.

The Child Tax Credit: The Eligibility Criteria

For the individual to be eligible for the criteria following are the requirements that need to be met:

• Need to have filed the tax returns for both 2019 and 2020 and claim the Child Tax credit for those returns. Likewise, to ensure that the information has been submitted to the IRS in the year 2020 in order to receive the Economic Impact payment using the Non-Fliers. This is the payment info Here tool. 
• To make sure that there is a principal home within the United States. This is inclusive of the District of Columbia and all the other 50 states. 
• The above criteria should be applied for more than six months of the year, or to file the joint return along with a spouse/partner who owns a principal house in the United States for more than six months in a year. 
• It is important to have a child below the age of 18 years at the end of 2021 and own a valid Social Security Number.

The Payment Per Month for the Child Tax Credit

The payments are made from July to December on the following dates:

• July 15
• August 13
• September 15
• October 15
• November 15
• December 15

The main purpose of the dependent tax credit is not only to offer financial ease to the parents, but it also has various economic implications. The Act was implemented to essentially benefit families from low to moderate-income groups. As the income levels went on higher levels and credit was phased-out gradually.

Child Tax Credit: The result in Case of Error

One of the prime consequences of an error in your Child Tax Credit could lead to a delay in refunds or a part of the refund.There are also instances when the entire credit might be delayed.In case you face such a situation, you need to:

• The individual must pay back any CTC amount that has been paid in error along with the interest. 
• You might be required to file Form 8862 which is ‘information to claim certain credits after disallowance’ before being able to claim Child Tax Credit once again. 
• There is a fat chance that the individual might face a penalty of up to 20% of the total credit amount that has been claimed.

How to Calculate the Child Tax Credit

If the modified adjusted gross income is $400000 or less, or $200000 or less, the CTC is worth $2000 per qualifying dependent child for the tax year of 2022. In case the MAGI increases the limits, the total credit amount will be reduced by $50 for every $1000 of the income exceeding the threshold till it is eliminated.

The Process to Claim the Credit

One can easily claim the credit through Form 1040 or 1040-SR. Also, one needs to fill out Schedule 8812; which is also known as the ‘Credits for Qualifying Children and Other Dependents’. This is submitted along with 1040. With the help of this schedule, one can easily figure out the Child tax credit amount and if applicable the amount of the partial refund that can be claimed likewise. 

There is some reputed ‘tax Software’ that can easily guide the individual through the process of claiming the Child Tax Credit. This is done with the help of a series of interviews that are used to simplify the process. The auto-fill feature is also available, on your behalf. In case the income falls below a certain threshold, one can also get free tax software through the IRS’s Free File.

The Child Tax Credit for 2023

So, what do we have to look forward to for the year 2023? Well, to start with the amount of the credit is much smaller and the eligibility is restricted as compared to 2021. This is essentially due to the rules that have been established through the 2017 Tax Cuts and Jobs Act-TCJA. The changes will be effective through the fiscal year 2025 in case Congress does not modify the Credit before then. 

In 2021, some great changes were made by ARP for one year that assisted many families by allowing them to receive half of the value of the credit over half a year instead of a bulk amount when the taxes were filed. The rest of the credit was claimed after the filing of the tax return which increased the number of the total returns processed by the IRS.

However, much like the previous year, the taxpayers can claim a credit of up to $2000 for eligible children. As for the year 2023, the credit is partially refundable along with an earning threshold that can start claiming up to $ 1400 of the portion which is termed as the ‘Additional Child Tax Credit’. 

As for the taxpayers who owe less in taxes than the refundable sum; they will have to add up their tax refund. This way the non-refundable part will reduce the taxes owed dollar for dollar.

Easy Sign-up Facilities for Low-Income Families

You do not need to worry even if you do not make enough as required to file taxes, as you can still reap benefits. 

An all-new ‘Non-Filer Sign-Up tool’ has been created by the collaboration of the Administration and the Code for America. This is an easy-to-use platform that can be used through mobiles and is also available in Spanish. For this year, the deadline was February 15. However, if you have missed the deadline, and are an eligible candidate, you can still claim the complete credit of up to $3600 per child by filing your taxes next year.

Read Also : Earned Income Tax Credit

Conclusion

One has to bear in mind that, in addition to the federal Child tax credit, there are a few states like California, Massachusetts and New York that have their own state-level CTCs. These can be claimed when one is filing the state returns, for this you can visit the state’s department of taxation website and get all the required details. However, if there are any duplicates, be free to reach out to our team of experts and we will be more than happy to assist you accordingly.

Frequently Asked Questions(FAQs)