In a Nutshell
People with qualifying children can claim the child tax credit on their federal tax returns to help reduce their tax burden. The child tax credit is reverting for the 2022 tax year.
If you have dependent children under the age of 17, you may qualify for the child tax credit. This partially refundable tax credit can help offset how much you owe in taxes or even provide a refund. You may qualify for a portion of this tax credit even if you don’t owe taxes.
In 2021, the American Rescue Plan Act of 2021 increased the amount of the child tax credit to $3,000 per qualifying dependent. However, this extra boost has now expired, and child tax credit rates for 2022 revert back to the previous level of $2,000 per dependent.
If you think you might be eligible for the child tax credit, keep reading to learn more.
In This Piece
- What Is the Child Tax Credit?
- How Much Child Tax Credit Will I Get This Year?
- How Do I Qualify for a Child Tax Credit?
- How to Prepare for Tax Season
What Is the Child Tax Credit?
The child tax credit is part of the Taxpayer Relief Act of 1997. It’s specifically designed to help reduce the tax liability for parents with dependent children aged 17 and under. As a partially refundable tax credit, it’s possible to receive a refund for this credit, even if you don’t owe taxes or if the amount of the credit exceeds how much you owe in taxes.
Studies show that the combination of the child tax credit and the earned income tax credit helps pull millions of children out of poverty every year. For example, in 2018, this combination helped push 5.5 million children above the poverty level.
To obtain this tax credit, you must list your dependents’ information on Form 1040 and complete Schedule 8812, Credit for Qualifying Children and Other Dependents.
How Much Child Tax Credit Will I Get This Year?
As mentioned above, the child tax rate for 2022 reverts back to the previous level. The maximum child tax credit for 2022 is $2,000 per qualifying dependent. For example, if you have two qualifying dependents, you can earn a tax credit of up to $4,000 ($2,000*2).
If you’re filing as head of household and earn more than $200,000 or filing as married and earn more than $400,000, you may not receive the full amount. If your adjusted gross income (AGI) exceeds these income thresholds, the child tax credit amount slowly starts to phase out. This phaseout rate is $50 per every $1,000 over the income threshold.
For example, if you’re filing head of household and your adjusted gross income is $220,000, your tax credit amount is reduced by $1,000 (($220,000-$200,000)*$50)). This means your tax credit for the year is $1,000 ($2,000-$1,000).
Additionally, the child tax credit is not fully refundable. If your tax liability is lower than your child tax credit, you’re only eligible for a partial credit of $1,500 per qualifying dependent. In the event your earned income is less than $2,500, you may not be eligible for the child tax credit.
If you have dependents between the ages of 17 and 24, you may be eligible for a $500 child tax credit for other dependents. This is a nonrefundable credit, so it can only help reduce your overall tax liability.
How Do I Qualify for a Child Tax Credit?
To be eligible for the child tax credit, you must first have an eligible dependent. This dependent must meet the following conditions:
- The child must be under the age of 17.
- You must claim this child on your current year’s tax return.
- The child must be related to you, such as a child, stepchild, sibling or eligible foster child or a descendant of any of these.
- The child must be a U.S. citizen, national or resident alien.
- You must provide at least one-half of the financial support for the child.
- The child must live with you for at least one-half of the year.
You must also meet income requirements by earning at least $2,500 throughout the year.
Who Is Eligible for the Child Tax Credit?
To be eligible for the child tax credit, you must have a qualifying dependent you claim on your current year taxes and provide more than one-half of their care. You must also earn at least $2,000 during the year.
How to Prepare for Tax Season
If you’re doing your taxes yourself, make sure you take all the eligible child tax credits and tax exemptions. You can also use online tax preparation services to ensure you obtain all the tax credits and deductions you can. This step can help reduce your overall tax liability and even help you earn cash back.
If, after taking all the eligible tax credits and deductions you can, you still owe taxes, you must pay this debt by Tax Day. There are a number of ways you can pay your taxes, including credit and debit cards, cash, check, wire transfer, and even installments.The important things are to make sure you file your taxes on time, take all the tax credits and tax deductions you can and pay any tax liability on time. Once you file your taxes, you can use the government’s track my child tax credit site to find out when you can expect to see these funds.
