2022 Tax Changes: Child Tax Credit sees up to $1,600 cut per child
SALISBURY, Md.- Key parts of the American Rescue Plan and the aid it gave to Americans are expiring this year, which will mean big changes in the 2022 returns, including the child tax credit expansion.
The program 2021 was expanded to cover more families, boosted the credit per child to $3,600, and allowed up to 50 percent of the credit to be distributed as monthly sums deposited in the bank account of millions of Americans.
The move that was widely credited with slashing childhood poverty in half, was not extended beyond its original funding, and its rollback will mean a return to the previous child tax credit figures and payment plans.
“This is big the child tax credit now reverts to the previous number of the pre-2021 rules so the American rescue plan was a one-shot deal for the child tax credit and will revert to the $2,000 per child and none of the money will be available in advance of the return,” said local CPA at UHY group Mark Welsh.
Welsh tells 47abc, for many families on Delmarva 2021 saw the biggest sums of money that families had ever been given, and the rollback will be significant for those who were hoping for its return.
“It is a significant cut, and it was distributed monthly, but with the refund happening when they file the return, my best advice is budgeting, cutting back on manageable costs, as I’m afraid we are heading towards recession with higher prices,” Welsh said.
Americans will also see changes to the Child and Dependent Care Credit, for those providing for children under the age of 13, according to Welsh who tells 47ABC in a statement:
“For the 2021 tax year only, the Child and Dependent Care Credit expanded in several ways under the American Rescue Plan. The percentage and the child care expense thresholds changed, so you can get a credit up to 50% of $8,000 ($4,000) in child care expenses for one child under 13, an incapacitated spouse or parent, or another dependent so that you can work and up to 50% of $16,000 in expenses ($8,000) for families with two or more dependents.
Prior to the American Rescue Plan, the Child and Dependent Care Credit could get you up to 35% of $3,000 ($1,050) of child care expenses for a dependent child under 13, an incapacitated spouse or parent, or another dependent so that you can work or look for work. For families with two or more dependents, the credit was up to 35% of $6,000 in expenses ($2,100).”
He tells us a similar change will tax place for the earned income tax credit; a refundable tax credit given to taxpayers that earn low to moderate income from a job or from being self-employed.
According to Welsh, the maximum credit shifts are:
· $6,728 with three or more qualifying children in 2021 to $6,935 with three or more qualifying children in 2022.
· $5,980 with two qualifying children to $6,164 with two qualifying children in 2022.
· $3,618 with one qualifying child to $3,733 with one qualifying child in 2022.
· $1,502 with no qualifying children to $560 with no qualifying children in 2022.
