2022 $2,000 Child Tax Credit: Who Qualifies for the Payment?
The child tax credit in 2022 will revert to terms offered by the IRS before the US bailout expanded it. Credit amount is smaller and eligibility is more restricted than last year under the rules established by the Tax Cuts and Jobs Act of 2017 (TCJA). These changes will be in effect until fiscal year 2025, if no action is taken by Congress to modify the appropriation before that date.
A big change that helped many families last year, instead of receiving monthly payments on the credit as they did from July to December in 2021, the money will be distributed as a one-time tax credit that will reduce the recipient’s tax bill or increase their tax refund.
Taxpayers with eligible children will be able to claim a credit of up to $2,000 per child. This year, the credit is partially refundable, and there is an income threshold to start claiming the up to $1,400 of the portion known as the “Additional Child Tax Credit”.
Taxpayers who owe less tax than the refundable amount will have it added to their tax refund, the non-refundable portion will reduce taxes dollar for dollar.
Which children are eligible for the 2022 Child Tax Credit?
Child Tax Credit 2022 is available to parents with dependents who are under the age of 17 at the end of the year, December 31, 2022, and who meet certain eligibility conditions. Under the enhanced credit, children aged 17 were eligible for the full amount of the much larger 2021 child tax credit.
For taxation years 2022 to 2025, the child must be able to be declared as a dependent in the taxpayer’s declaration and to live in the same residence as the taxpayer for more than half of the year. The child cannot provide more than half of their own financial support during the tax year.
The child must have a valid tax identification number in the form of a social security number (SSN) authorized to work. Prior to the TCJA and under the inflated 2021 version, taxpayers could claim children who have an Individual Taxpayer Identification Number (ITIN) which is issued by the IRS, not the Social Security Administration.
Taxpayer Income Requirements to Claim the 2022 Child Tax Credit
Parents of eligible children must have a adjusted gross income (AGI) of less than $200,000 for single filers and $400,000 for married filers jointly to claim the full credit. For each $1,000 or fraction thereof over these thresholds, the credit is reduced by $50.
For low-income Americans, they must have an income of at least $2,500 to qualify for the refundable portion of the credit. The amount that can be claimed is a portion of income above this threshold. To calculate the amount that can be claimed, you need to subtract $2,500 from your “earned income”, e.g. social security benefits and unemployment benefits don’t count, then multiply that number by 15%.
The child tax credit program was significantly expanded last year
President Biden’s massive $1.9 trillion relief package was designed to provide financial support to American families and the boosted Child Tax Credit was one of the most effective measures.
The temporary extension increased the total amount offered to $3,000/$3,600 per child, nearly doubling the previous maximum entitlement for parents of young children. It also made the credit fully refundable, ensuring that even low-income households could receive the full value of the credit.
Importantly, the payment structure was changed to distribute credit in the form of monthly direct payments. Democrats had hoped to extend the credit through 2022 and beyond, but families only experienced direct payments for the last six months of 2021. That equates to a monthly direct deposit of $300 for children under five-year-olds and $250 for 6-year-olds. 17.
Democrats in Congress push for further expansion
Numerous studies have linked the expansion of the 12-month child tax credit to a decrease in child poverty, and the testimonies of those who received the payments have been consistent. A Center on Budget and Policy Priorities study found that credit helped Reduce child poverty in the United States by approximately 40%.
However, Biden was unable to secure an extension of the program when congressional Republicans declined to support his late 2021 Build Back Better legislative proposals.
A number of Democrats in the Senate are making a concerted push to have the child tax credit expansion reintroduced, and experts noted that the proposal in isolation enjoys some bipartisan support.
Senator Sherrod Brown confirmed, “We are still working on it”in an interview with CNBC, adding, “I haven’t done anything that has caused the reaction at home and in the country.”
Andrew Carothers, research analyst at the Bipartisan Policy Center, pointed out that the proposal also has decent bipartisan appeal in the Senate, unusual in a time of such polarized political discourse.
“There is a really strong bipartisan legacy with child tax credit,” he said. “It really is an avenue for lasting policy change and to ensure that the future of credit remains as successful as it has been in the past.”