The American Rescue Plan of 2021 supplied big tax breaks for many families. Among them was the increased child tax credit of $3,000 per child over the age of six and $3,600 per child under the age of six. Also there was a higher age limit of 17 and many received monthly prepayments of the credit up to $300 per month per child in 2021 due to the expanded credit. However, all of these enhanced benefits expired at the end of 2021 and are not available for 2022.

Changes for 2022

The child tax credit has reverted back to $2,000 per qualifying child and the qualifying age has decreased from 17 to 16.  While in 2021 the credit was fully refundable, it now reverts back to only being partially refundable (up to $1,500) in the lower income phase-out ranges.

The phase-outs of the child tax credit are based upon income rather than number of qualifying children. The credit phases in with earnings above $2,500 and begins to phase out at adjusted gross income (AGI) over $400,000 for married filing joint filers and AGI over $200,000 for all other filers. In addition, there are no monthly advance payments of the credit for 2022.

Added requirements of the child tax credit that have not changed include:

  • The dependent must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (i.e., a grandchild, niece, or nephew).
  • The dependent must provide no more than half of their own financial support during the tax year.
  • The dependent must have lived with you for more than half the tax year.
  • The dependent must be properly claimed as such on your tax return.
  • The dependent must be a US citizen, US national, or US resident alien.

Due to the reduced amount and age limits of the child tax credit, you may see changes in your tax liability for 2022. Please reach out to your tax advisor at Ketel Thorstenson to find out how this may impact your 2022 tax return.