This 2022 & 2023 Child Tax Credit article has been updated with all of the latest information for the 2022 & 2023 tax years. There were some notable and what turned out to be temporary pandemic-related changes to the Child Tax Credit in the 2021 tax year with the American Rescue Plan Act, with a fairly significant Child Tax Credit expansion and the creation of a Child Tax Credit portal for taxpayers. For the 2022 and 2023 Child Tax Credits, those temporary pandemic increases revert to the prior (2020) Child Tax Credit levels highlighted below that were part of the Tax Cut & Jobs Act (tax reform), with the refundable portion of the credit slightly increasing to $1,500 maximum.
What is the Child Tax Credit?
The Child Tax Credit is a significant tax credit for those with qualified dependent children under age 17 (more on qualifications in a bit). A tax credit is a subtraction from actual taxes owed, dollar-for-dollar, which is much more valuable than a deduction (which is a subtraction from your taxable income, not a subtraction of taxes owed). The Child Tax Credit can reduce your tax obligation down to zero, with the potential to be partially refundable if you are eligible for the Additional Child Tax Credit, which means you could get a portion of the credit refunded to you.
What is the Additional Child Tax Credit?
The “Additional Child Tax Credit” is not well named, so you’d be best served to ignore the name. The Additional Child Tax Credit is the refundable portion of the Child Tax Credit, which you may be eligible to receive if the amount of the credit is greater than the total balance of income taxes you owe. In order to figure out if you are eligible for the Additional Child Tax Credit, you would fill out IRS Schedule 8812 or have tax software (suggestions below) automatically do this for you.
The 2022 Child Tax Credit Amount
The 2022 Child Tax Credit is $2,000 per qualifying child and is refundable up to $1,500 if eligible for the Additional Child Tax Credit. The Child Tax Credit is subject to the income phaseouts noted below. While the amount of the credit is less than the temporarily increased 2021 levels, it is higher than the $1,000 amount, prior to the 2018 tax reform.
2022 Additional Child Tax Credit Amount
The 2022 Additional Child Tax Credit (amount of the Child Tax Credit that may be refunded) is up to a maximum of $1,500 if taxes owed reach that amount (and less if they do not). For example, if you’re eligible for a $2,000 Child Tax Credit but the total amount of your tax balance owed is $250, you may be eligible for up to a $1,250 refundable Additional Child Tax Credit ($1,500 – $250). The refundable amount is equal to 15% of earned income above $2,500 (see my post on the earned income tax credit, which can be claimed separately as well).
2022 Child Tax Credit Income Level Phaseouts
The 2022 Child Tax Credit income level phaseouts will revert to the levels that were in place in 2020. The amount of the Child Tax Credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly. The Child Tax Credit phaseout rate is $50 for each additional $1,000 (or fraction thereof) above the aforementioned income thresholds.
The 2023 Child Tax Credit Amount
The 2023 Child Tax Credit is the same as the 2022 Child Tax Credit, at $2,000 per qualifying child and is refundable up to $1,500 if eligible for the Additional Child Tax Credit. The Child Tax Credit is subject to the income phaseouts noted below.
2023 Additional Child Tax Credit Amount
Unless there are inflation adjustments, the 2023 Additional Child Tax Credit (amount of the Child Tax Credit that may be refunded) will be the same as the 2022 amount – up to a maximum of $1,500 if taxes owed reach that amount (and less if they do not). For example, if you’re eligible for a $2,000 Child Tax Credit but the total amount of your tax balance owed is $250, you may be eligible for up to a $1,250 refundable Additional Child Tax Credit ($1,500 – $250). The refundable amount is equal to 15% of earned income above $2,500 (see the above link on the earned income tax credit, which can be claimed separately as well).
2023 Child Tax Credit Income Level Phaseouts
The 2023 Child Tax Credit income level phaseouts are the same as 2022. The amount of the Child Tax Credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly. The Child Tax Credit phaseout rate is $50 for each additional $1,000 (or fraction thereof) above the aforementioned income thresholds.
How Do I Claim the Child Tax Credit?
If you have a qualifying child (see the next section for details), you will need to file a tax return in order to claim the refundable Additional Child Tax Credit, even if your income level falls below the minimum income to file taxes threshold.
In addition to filling out the appropriate lines in your 1040 form, you will need to submit IRS Schedule 8812 to claim the Child Tax Credit and Additional Child Tax Credit.
Claiming the Child Tax Credit (particularly the refundable portion) is not easy, but the best tax software will help you determine eligibility and fully take advantage of the Child Tax Credit through the software questionnaire and resulting paperwork. Here are my favorites (along with some nice affiliate partner discounts):
- H&R Block: $30 or $35 off partner discount
- TurboTax: best available partner discounts
- TaxSlayer: 25% off partner discount
- TaxAct: up to 40% off partner discount
What is a “Qualified Child” for the Child Tax Credit?
A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
- Age Test: To qualify, a child must have been under age 17 – age 16 or younger – at the end of the year.
- Relationship Test: To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals (includes your grandchild, niece, or nephew). An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support Test: In order to claim a child for this credit, the child must not have provided more than half of their own support for the year.
- Dependent Test: You must claim the child as a dependent and that you provided at least half the child’s support during the tax year.
- Citizenship Test: To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence Test: The child must have lived with you for more than half of the tax year with some exceptions,
- A child who was born (or died) during the tax year is considered to have lived with you for the entire year.
- Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you.
- There are also some exceptions to the residency test for children of divorced or separated parents. For details, see the instructions for Form 1040.
- Social Security Test: Beginning with tax year 2018, your child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit. Children with an ITIN can’t be claimed for either credit. If your child’s immigration status has changed so that your child is now a U.S. citizen or permanent resident but the child’s social security card still has the words “Not valid for employment” on it, ask the SSA for a new social security card without those words. If your child doesn’t have a valid SSN, your child may still qualify you for the Credit for Other Dependents. If your dependent child lived with you in the United States and has an ITIN, but not an SSN, issued by the due date of your return (including extensions), you may be able to claim the new Credit for Other Dependents for that child.
There is a qualifying child questionnaire on the IRS website to help you determine eligibility, if you are unsure or want to double-check.
Can you Claim a Child Tax Credit in the Year the Child was Born?
After looking at the ‘residence test’ above, I was left wondering whether or not you could claim the Child Tax Credit in the year the child was born if the child was born in the second half of the year. Publication 972 lists this as one of the exceptions in which you can claim the credit:
A child is considered to have lived with you for more than half of (the year) if the child was born or died in (the year) and your home was this child’s home for more than half the time he or she was alive.
Tax Credits for Child Care
In addition to the Child Tax Credit, there are also tax credits for child care that you should look into, if you’ve paid for child care. You will need to file form 2441.
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