CandleFocus Glossary Editor
The Child Tax Credit (CTC) is a tax benefit intended to cut taxes for families with children. For the 2021 tax year, the credit was increased to $3,000 and $3,600 per eligible child under age 6. This credit is partially refundable and can be received in advance payments.
To qualify for this credit, taxpayers must generally meet four requirements. First, the dependent must be age 18 or younger. Second, they must be related to the taxpayer in one of several ways, including being an adopted child or grandchild, a stepchild, or a foster child. Third, the dependent must have lived with the taxpayer for more than half of the year. Fourth, they cannot provide more than half of their own financial support.
The credit is calculated by comparing the taxpayer's adjusted gross income (AGI) against the median. For 2021, the CTC amount for taxpayers making more than $75,000 in AGI as single filers and $150,000 for joint filers was reduced by $50 for every $1,000 earned.
For tax year 2022, the credit will revert back to a maximum of $2,000 per eligible child and be only partially refundable. In addition, it will not have the potential of being received in advance payments. As proposed in new legislation, the CTC could be further modified in the future, so taxpayers are encouraged to stay up to date with changes by regularly checking the Internal Revenue Service (IRS) website.
The Child Tax Credit can be a valuable benefit for families looking to reduce their taxes, so long as they meet the requirements. This credit can be used to lower the amount of taxes owed or to receive a refund. Understanding the size of the credit, eligibility criteria, and other relevant facts are important for those attempting to maximize their tax savings.
To qualify for this credit, taxpayers must generally meet four requirements. First, the dependent must be age 18 or younger. Second, they must be related to the taxpayer in one of several ways, including being an adopted child or grandchild, a stepchild, or a foster child. Third, the dependent must have lived with the taxpayer for more than half of the year. Fourth, they cannot provide more than half of their own financial support.
The credit is calculated by comparing the taxpayer's adjusted gross income (AGI) against the median. For 2021, the CTC amount for taxpayers making more than $75,000 in AGI as single filers and $150,000 for joint filers was reduced by $50 for every $1,000 earned.
For tax year 2022, the credit will revert back to a maximum of $2,000 per eligible child and be only partially refundable. In addition, it will not have the potential of being received in advance payments. As proposed in new legislation, the CTC could be further modified in the future, so taxpayers are encouraged to stay up to date with changes by regularly checking the Internal Revenue Service (IRS) website.
The Child Tax Credit can be a valuable benefit for families looking to reduce their taxes, so long as they meet the requirements. This credit can be used to lower the amount of taxes owed or to receive a refund. Understanding the size of the credit, eligibility criteria, and other relevant facts are important for those attempting to maximize their tax savings.