Historically many people have claimed the child tax credit to help offset the rising cost of raising children (did you know that on average, kids cost approximately $300,000 from birth to age 17?!).
There have been a lot of changes to the child tax credit over the past few years; it first changed during Tax Reform in 2018 and then again as part of the Cares Act in 2021. Here is an update on the credit for 2022.
Credit Amount
In 2022 the child tax credit goes back down to $2,000 per child. In 2021, the credit was up to $3,600 per kiddo. There will also no longer be any advanced payments of the credit like we saw in 2021. The credit applies if all of these apply:
- The child is younger than 17 at the end of the tax year, December 31, 2022
- The taxpayer claims the child as a dependent
- The child lives with the taxpayer for at least six months of the year
- The credit is refundable, now up to $1,500. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,500 as part of their refund.
Earned Income Threshold
The income threshold to claim the credit is $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
Phaseout
The income threshold at which the child tax credit begins to phase out is $200,000 for single filers and $400,000 if married filing jointly.
Other Dependents
Older children & other dependents still qualify for a $500 per dependent credit. This credit is only for off-setting tax and is non-refundable. Also, other dependents cannot earn more than $4,400 per year to be eligible for the $500 credit.
Candace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances.
