Do You Qualify for the Child Tax Credit?

There are no two ways around it: childcare is expensive! In many cities, it can cost nearly as much as the mortgage or rent payment, which puts parents in a Catch-22: they have to work to afford childcare, but they need childcare in order to work! Factor in the costs for healthcare coverage, and there’s a ton of financial pressure on parents. This was especially true for families dealing with financial hardships during the COVID-19 pandemic. So in an effort to help, Congress temporarily raised Child Tax Credit payments to working families in the American Rescue Plan Act of 2021.

For tax year 2022, the Child Tax Credit enhancements have been allowed to expire and revert to pre-COVID levels. So let’s focus on the key changes:

• The enhanced credit allowed for qualifying children under age 6 and children under age 18 has expired.
• The increased age allowance for a qualifying child has expired. A child must be under the age of 17 at the end of 2022 to be a qualifying child.
• For 2022, the initial amount of the Child Tax Credit is $2,000 for each qualifying child. The credit amount begins to phase out where modified adjusted gross income exceeds $200,000 ($400,000 in case of a joint return). The amount of the Child Tax Credit that can be claimed as a refundable credit is limited as it was in 2020, except that the maximum Additional Child Tax Credit amount for each qualifying child increased to $1,500.
• In 2022, qualifying families will no longer get advance child tax credit payments. This means those taxpayers will get the credit when they file that return in 2023.
  
  

It’s important to remember that information surrounding child tax credits can change each year, making it essential to keep up with the current laws, so you know what to expect. 

Think you may qualify but have questions about your household’s specific tax situation? After consulting with your tax professional, please schedule some time with our office to review how the Child Tax Credit may impact your financial plan!