The bigger and better child tax credit that applied for 2021 is gone, replaced by a new set of rules for taking the credit on 2022 returns.
The IRS’s tax filing season is upon us. The agency starts accepting individual tax returns for 2022 on January 23. And the filing deadline for most individual returns is April 18. As you get ready to prepare your return, or alternatively, gather your records to take to your accountant or other paid preparer, you’ll want to keep in mind the tax changes that applied for 2022…and how they should be reported on your return. One of the most significant changes for 2022 was to the child tax credit, which is claimed by tens of millions of parents every year.
The bigger and better child tax credit that applied for the 2021 tax year is gone. The enhancements that Congress made to the child credit in the 2021 stimulus law were temporary, applying only to 2021. They all expired on December 31, 2021, including the monthly payments, higher credit amount, letting 17-year-olds qualify, and full refundability. Democratic lawmakers had hoped to get these expansions extended through 2022 and beyond, touting the impact that a higher and fully refundable child tax credit would have on reducing child poverty in the United States. But they were unable to make a deal with congressional Republicans before Congress adjourned at the end of 2022. So, the rules for taking the child credit revert back to those that were in place for 2020.
This is all enough to make your head spin. But don’t worry – we have answers to a lot of the questions parents are asking about the 2022 child credit, including how to report the credit on their 2022 return.
Changes Made for 2021
Question: What changes were made to the child tax credit for 2021?
Answer: The American Rescue Plan Act of 2021 temporarily expanded the child tax credit for 2021 only. First, the law allowed 17-year-old children to qualify for credit. Second, it increased the credit to $3,000 per child ($3,600 per child under age 6) for many families. Third, it made the credit fully refundable for families who lived in the U.S. for more than six months during 2021 and removed the $2,500 earnings floor. Fourth, it required half of the credit to be paid in advance by having the IRS send monthly payments to families from July 2021 to December 2021.
Changes Made for 2022
Question: What changes were made to the child tax credit for 2022?
Answer: All of the 2021 expansions are gone, with the rules reverting back to those that were in place for filing 2020 returns. For 2022, the child tax credit is $2,000 per kid under the age of 17 claimed as a dependent on your return. The child has to be related to you and generally live with you for at least six months during the year. He or she also must be a citizen, national or resident alien of the United States and have a Social Security number. You have to put the child’s name, date of birth, and SSN on your tax return, too.
The credit begins to phase out if your 2022 modified adjusted gross income (AGI) exceeds $400,000 on a joint return or $200,000 on a single or head-of-household return. Once you reach the $400,000 or $200,000 modified AGI threshold, the credit amount is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount. Modified AGI is the AGI shown on Line 11 of your 2022 Form 1040, plus the foreign earned income exclusion, foreign housing exclusion, and amounts excluded from gross income because they were received from sources in Puerto Rico or American Samoa.
The credit is no longer fully refundable, either. Instead, only up to $1,500 of the child credit is refundable for some lower-income individuals with children. And you must have at least $2,500 of earned income to even qualify for this partial refund.
Phase-Out of Credit
Question: Can all families claim the $2,000 per-child tax credit on 2022 returns?
Answer: No, not all families with children get the $2,000 per-child tax credit for 2022, but most do. The tax break begins to phase out at modified AGIs of $400,000 on joint returns and $200,000 on single or head-of-household returns. The amount of the credit is reduced by $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold amount.
For example, if a married couple has one child who is 10 years old, files a joint return, and has a modified AGI of $425,000 for 2022, they don’t get the full $2,000 child credit. Instead, since their modified AGI is $25,000 above the phase-out threshold for joint filers ($400,000), their credit is reduced by $1,250 ($50 x 25) – resulting in a final 2022 child credit of $750.
Not Fully Refundable
Question: What does it mean that the child tax credit is no longer fully refundable for 2022?
Answer: For the 2021 tax year, the expanded child tax credit was fully refundable for families who live in the United States for more than one-half of the year. This meant that people who qualified for the child tax credit received the full credit as a refund, even if they had no tax liability. This has changed. For 2022, certain low-income people can only get up to $1,500 per child as a refund, instead of the full $2,000 child credit, if their child credit exceeds the taxes they otherwise owe. Also, for 2022, partial refundability only applies to families with at least $2,500 of earned income, meaning parents have to be employed at least part-time or otherwise have earnings.
Not Required to File Tax Returns
Question: I generally do not file tax returns because my income is below the threshold required to file. Should I file anyway for 2022 to claim the child tax credit?
Answer: Yes, if you qualify for partial refundability of the credit (see Q&A immediately above). But even if you don’t qualify for partial refundability, you still may want to file a tax return if you had wages or other income for which federal income taxes were withheld in 2022. Or maybe you’re eligible for another refundable tax credit, such as the earned income tax credit.
Question: Can I take the child tax credit on my return for my daughter who turned 17 in 2022?
Answer: No. Seventeen-year-olds qualified as eligible children for the child credit for 2021, but not for 2022. The qualifying age for children for 2022 is 16 and under.
Social Security Numbers for Children
Question: My child doesn’t have a social security number. Can I claim the child credit?
Answer: No. Only children with Social Security numbers qualify for the child credit. You must put your child’s name, date of birth, and Social Security number on your 2022 Form 1040(opens in a new tab).
Although children must have Social Security numbers, you can have either a Social Security number or an individual taxpayer identification number.
Reporting the Credit on Form 1040
Question: How do I report the child credit on my 2022 return?
Answer: On your 2022 return, you must use Part I of Schedule 8812(opens in new tab) to figure your total child tax credit and then transfer the amount on Line 14 of the 8812 to Line 19 of Form 1040. If you qualify for the refundable portion of the child tax credit, complete Part II of Schedule 8812 and transfer the amount on Line 27 of the 8812 to Line 28 of Form 1040.
Question: Will claiming the child tax credit on my 2022 return can cause my refund to be delayed?
Answer: It depends. Although we don’t expect as many return filers to be waiting months on end for their refunds as compared to last year, we still expect some rocky seas ahead during this tax filing season, especially for people who file paper returns. However, most people who file electronically, make no errors on their return, and request that their refund be directly deposited into their bank account shouldn’t see significant delays. The IRS is generally promising refunds within 21 days of the filing of electronic returns. However, people who claim the refundable portion of the child tax credit will see delayed refunds, at least until February 28, IRS warns. That’s because of procedures the agency has had in place for over five years to help prevent the issuance of fraudulent refunds pertaining to refundable tax credits.