Child Tax Credit 2022: Understanding the Requirements & Benefits

The impact of the Covid-19 pandemic has affected both parents and children. Millions of Americans had to choose between parenting and a paycheck. During the pandemic, many children under the age of 18 lived below the poverty line. In order to combat this, the 2021 Child Tax Credit reform was expanded. This means parents received an enhanced credit, even if they failed to pay their 2019 and 2020 taxes.

The American Rescue Plan Act expanded the Child Tax Credit as a part of the stimulus package worth $1.9 trillion that was approved in March of 2021 by President Joe Biden.

This dependent tax credit was predicted to greatly benefit low-income families and reduce child poverty by nearly half. It also provided extra cash to American families with a moderate income. However, to qualify for the Child Tax Credit, there was a set income cutoff.

The following individuals received the full payment of $3,600, with payments reduced by $50 for every $1,000 of income above these limits:

AGI

Status

$75,000

Single taxpayers

$112,500

Head of household

$150,000

Joint taxpayers

The payments phased out entirely for single taxpayers earning up to $240,000 and joint filers (married or spouse) earning up to $440,000.

The Child Tax Credit was first introduced In 1998, and the amount was capped at $400 per year. Gradually, the credit amount rose up to $3,600 by the year 2021. The age for a child to qualify was also extended to 17 years.

Child Tax Credits Comparison

There are several differences between the 2020, 2021 and 2022 child tax credits.

2020

2021

2022

  • In 2020, eligible taxpayers could claim a tax credit of $2,000 per qualifying dependent child under age 17
  • If the amount of the credit exceeded the tax that was owed, the taxpayer was generally eligible to receive a refund for the excess credit amount up to $1,400 per qualifying child
  • The credit was eligible for a phaseout at the rate of $50 for each additional $1,000 (or fraction thereof) above a high-income threshold of MAGI
  • For 2021, the credit increased to $3,600, and the age for a qualifying child was extended to 17
  • The credit amount rose to $3,000 (children under age 18) or $3,600 (children younger than 6) and became fully refundable for the amount that exceeds the taxes owed
  • The 2021 credit phaseout remained at $50 for each $1,000 of a MAGI threshold. However, the threshold amounts were substantially reduced for 2021 
  • For 2022 taxes, Congress has yet to renew the extension of the 2021 tax credits, including monthly payments.
  • The credit is projected to revert back to $2,000 for each dependent 17 years and younger

Benefits of the Child Tax Credit

There are many benefits that come with the Child Tax Credit. Most families received a $3,000 tax credit for each child that was 17 years old or younger and $3,600 for children under the age of six. The payment was distributed in advance through monthly payments. Also, parents did not have to owe taxes in order to receive the credit, meaning the credit was fully refundable.

Eligibility requirements to receive the Child Tax Credit

In order to meet the eligibility requirements for the advance Child Tax Credit payments, taxpayers and their spouses filing a joint return had to:

  • Have filed a tax return for both 2019 and 2020 and claimed the Child Tax Credit on those returns; or submitted their information to the IRS in 2020 to receive the Economic Impact Payment using the Non-Filers: Enter Payment Info Here tool
  • Have had a principal home in the United States (including the District of Columbia and all 50 states) for more than six months of the year, or filed a joint return with a spouse who had a principle home in the United States for more than half the year
  • Have had a qualifying child who was below the age of 18 at the end of 2021 and had a valid Social Security Number

Payments per month

These payments were made per month from July to December.

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

The purpose of this dependent tax credit wasn’t only to make finances easier for parents, it also had economic implications. The Child Tax Credit was initially enacted to benefit low- and moderate-income families. At higher income levels, the credit was phased out gradually.

Keep checking FlyFin.tax to learn more about the Child Tax Credit.

FAQs

How do I receive the advance Child Tax Credit payments?

If the IRS has your bank information, then your payments will be sent to you as a direct deposit. If the bank does not have your bank information, you will receive the payments by mail.

If I am pregnant, am I eligible for the Child Tax Credit this year?

According to the IRS, the parent of any child born in 2022 is eligible to receive a Child Tax Credit. Once the child receives a Social Security number, you may provide that information to the IRS.

You can claim your Child Tax Credit payment when you file your 2022 return next year.

My child turns 18 in December of 2022. As parents, will we receive the Child Tax Credit for 2022?

No. According to the IRS, for tax year 2022, the qualifying child must be under 17 at the end of 2022. However, taxpayers with dependents who do not qualify for the child tax credit may be able to claim the credit for other dependents.

As a legal citizen, you are eligible for the dependent tax credit since you typically possess a Social Security number. For tax purposes, resident aliens are the same as citizens.

As a grandparent supporting my grandchild, can I claim the dependent tax credit?

As a grandparent, you are eligible to claim the credit under the head of household category. This means you are entitled to the credit, as long as you are within the income threshold.

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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