The Child Tax Credit in 2023 will continue at the same level that was offered before the expansion of the credit passed in the American Rescue Plan.
The amount of credit is smaller, and the eligibility is more limited than in 2021, because of legislation established by the 2017 Tax Cuts and Jobs Act (TCJA). These changes will take effect in fiscal year 2025 if Congress doesn’t change the debt ahead of time.
In 2021, the ARP made major changes to the credit for one year that helped many families by allowing them to receive half of the cost of the credit over six months rather than a large amount when filing their taxes. The remaining half of the debt was claimed when they filed their taxes, which increased the amount of income processed by the IRS.
As of last year, taxpayers with eligible children can claim a credit of up to $2,000 per child. This year a portion of the debt is repaid, and there is an income limit to start claiming the up to $1,400 in a category called the “Additional Child Tax Credit.”
Taxpayers who owe less tax than their refund amount will have it added to their tax refund, and the nonrefundable portion will reduce the taxes owed dollar-for-dollar.
Which children are eligible for the 2022 Child Tax Credit?
The 2023 Child Tax Credit is available to dependent parents who are 17 on 31 December 2022 and those who meet certain qualifications. Under the credit extension, children aged 17 were eligible for the full amount of the 2021 Child Tax Credit.
For tax years 2022 to 2025, the child must qualify as a dependent on the taxpayer’s return and reside in the same household as the taxpayer for more than half a year. A student cannot provide more than half of his or her own financial aid in a fiscal year.
The child must have a valid taxpayer identification number in the form of an authorized Social Security number (SSN). Before the TCJA and under the 2021 souped-up version, taxpayers could claim children with taxpayer identification numbers (ITIN) issued by the IRS, not the Social Security Administration. This means that immigrants and residents could also claim the credit.
Taxpayer income requirements to claim the 2022 Child Tax Credit
Parents of eligible children must have a adjusted gross income (AGI) less than $200,000 for single filers and $400,000 for married filing jointly the full credit is claimed. For each $1,000, or fraction thereof, above those limits, the debt is reduced to $50.
For low-income Americans, they must have an income of at least $2,500 to qualify for the repayment portion of the loan. The amount that can be claimed is a portion of income above that threshold. To determine how much can be claimed, You need to subtract $2,500 from your “income”, for example, not counting Social Security and unemployment benefits, then multiply that number by 15 percent. .