What You Need to Know About the Child Tax Credit in 2022

Today, we’re tackling a surprisingly controversial topic on the blog: the enhanced Child Tax Credit. In 2021 parents got a little extra cash from the government in the form of increased maximums and advance payments. And while more money in your pocket sooner than expected sounds like a no-brainer, as with everything when it comes to the IRS, the updated Child Tax Credit brought its fair share of headaches, especially for us tax preparers.

Now that we’ve wrapped up the 2021 tax season and the enhanced Child Tax Credit has expired, how will this year look different for parents? Keep reading to find out.

Decreased Maximum Amount

In 2021 parents of six to 17-year-olds were eligible to receive up to $3,000 and parents of children under six up to $3,600. However, for 2022, this amount returns to the 2020 standards of $2,000 per child age 16 and younger. This is drastically lower than last year, especially if you have multiple dependents. 

A few other points to note here are that the 2021 credit was fully refundable, and there were no minimum income requirements to receive the refund. This year, the credit will be refundable only up to $1,500 depending on your income, and your minimum income must be at least $2,500.

Increased Phase out Amounts

While the maximum refund amount will decrease from last year, the income threshold at which you phase out of eligibility for the tax credit will actually increase. Last year if you brought home more than $75,000 as a single filer or $150,000 as married filing jointly, you began to phase out by $50 for every $1,000 you earned over those maximums.

Now in 2022, if you earn less than $200,000 as a single filer or $400,000 as a joint filer, you will be eligible for the full $2,000 Child Tax Credit. The same phase-out amount of $50 for every $1,000 over still applies.

No Advance Payments 

Now here’s the controversial part of all this. Some of you loved the advance Child Tax Credit payments because it was a nice little surprise during a time when a lot of parents needed it. Others, like your friendly neighborhood tax preparer, found this process to be a nightmare come tax return time. Whichever side of the fence you fall on, advance payments will not be part of the 2022 refund. 

The good news is that without advance payments, you’ll either owe less or receive more money back when filing your taxes next spring.

As always, we’re here to answer any questions you may have regarding the updated Child Tax Credit and any other aspects of your tax returns. Reach out at info@accountabilitytab.com.