What is the Child Tax Credit?
The Child Tax Credit uses a parent’s modified adjusted gross income to provide a partially refundable tax credit for the 2022 tax year. A partially refundable credit means that you can receive a portion of the credit even if you do not have income tax liabilities for the tax year. This means that if a parent qualifies for the credit and files taxes, they may claim the credit.
Can all parents claim the Child Tax Credit?
No. Parents must file taxes and qualify under residency requirements and income limits in order to claim the Child Tax Credit.
Parents who have their main home in the U.S. for more than half of the year and have children who are 17 or younger on the last day of the year will meet the residency requirement. U.S. military personnel and federal employees assigned outside of the U.S. also qualify.
There are income limits that apply to the Child Tax Credit. It is not clear yet if the income limits will change for tax year 2022. For 2021, a qualifying parent needed to have the following modified adjusted gross income (MAGI):
- $75,000 or less for those who file single or married filing separately.
- $112,000 or less for those who file head of household.
- $150,000 or less for those who file married filing jointly.
When taxpayers exceed those income limits, the credit is reduced:
- For every $1,000 in additional MAGI, the credit is reduced by $50 for any child, with a floor of the original $2,000 credit.
- If the taxpayer's MAGI is more than $200,000 ($400,000 for married filing jointly), the credit continues the $50 reduction per $1,000 in additional MAGI with no floor.
How much is the Child Tax Credit and what changed in 2022?
Unless legislation is passed, some of the temporary changes that were made to the Child Tax Credit in 2021 will not apply in 2022. Some of the changes from last year include:
- The credit amount is reduced to $2,000.
- No portion of the credit is available in advance.
- $1,500 per child is the maximum allowable refund for individuals with no tax liability.
Before 2021, the Child Tax Credit was not available for children that were 17 at the end of the tax year. In 2022, children that are 17 or younger at the end of the tax year qualify for the Child Tax Credit.
Are cash payments available for the Child Tax Credit?
No. For a portion of 2021, the IRS paid part of the Child Tax Credit in advance. Those advance payments are not available for 2022 as of the writing of this article. There are, however, ongoing political efforts to renew the monthly Child Tax Credit payments for 2022, and the law regarding the Child Tax Credit may change.
Do co-parents that share custody and support 50/50 both get the Child Tax Credit?
No. If parents file taxes separately, the parent that claims the child as a dependent on their tax return receives the credit. If parents file separately and both try to claim the child as a dependent, the IRS will only recognize one parent’s claim. In these situations, the parent with whom the child primarily lives will typically be who the IRS allows to claim the child as a dependent. In short, there is one credit for each child.
Often, joint child custody agreements with income tax provisions will control who receives the credit. These agreements can, however, provide for alternating years or other creative solutions to ensure both parents share the tax benefits.
Will the Child Tax Credit affect public benefits?
The Child Tax Credit has no impact on any public benefits. Even more, the Child Tax Credit is not subject to offset for overdue taxes or other federal or state debts that taxpayers or their spouses owe. However, child support arrearages may continue to offset these credits.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.