If you are an American parent, you may have some money coming to you from the government. Congress has changed the Child Tax Credit 2021 so that it provides financial relief for families that have suffered hardship as a result of the COVID-19 pandemic.
The new rules are expected to reduce child poverty in the US by half and reduce racial disparities by making funds available to more Black and Hispanic families. Learn everything you need to know about the Child Tax Credit below.
The Child Tax Credit is a deduction from income taxes due in a flat amount for each dependent child in a family and has been around for years. However, in March of 2021, Congress passed some changes in the Child Tax Credit as part of the American Rescue Plan.
The revised Child Tax Credit acts as an economic stimulus to help families that may have lost jobs or income because of the pandemic and the widespread business closings that were implemented to stop the spread of the disease.
There are some significant changes to the Child Tax Credit for the 2022 tax year:
- 2021 expansions are done – The Child Tax Credit rules and benefits revert to those before the American Rescue Plan.
- Lower amount – The maximum amount is $2,000 per qualifying child.
- Age limit – Each dependent must be younger than 17 years of age.
- Partially refundable – The tax credit is refundable up to $1,400 but is no longer fully refundable.
- No more prepayments – Advanced payments were not issued for the 2022 tax year.
- Income limits – The credit is available for single taxpayers who earned up to $200,000 or married couples filing jointly who earned up to $400,000.
Likewise, the Child and Dependent Care Credit and Earned Income Tax Credit adjust back to the pre-2021 changes.