The expanded child tax credit included in the American Rescue Plan is no longer in effect. Here’s what that means for families’ tax returns in 2023.
As people prepare to file their 2022 tax returns, child tax credits are top of mind for many.
Families usually claim the child tax credit when they file their annual tax return, reducing any money they might owe, or increasing their refund. In 2021, Congress passed the American Rescue Plan, which raised the total credit amount per child and allowed people to collect some of the tax credit in advance on a monthly basis.
But recent online search data show people are wondering if they will receive the same higher child tax credit when filing their returns in this year.
Can families receive the increased child tax credit in 2023?
No, families can’t receive the increased child tax credit in 2023.
WHAT WE FOUND
The American Rescue Plan only expanded the child tax credit for the 2021 tax year. That means the credit has returned to its pre-pandemic amount for the 2022 tax year.
Under the American Rescue Plan, parents or guardians who met certain qualifications could get a tax credit of $3,600 for children 5 and under, and $3,000 for children ages 6 to 17. The child tax credit had previously been $2,000 per child.
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The increased credit was partly distributed on a monthly basis in advance of filing taxes, meaning families received between $250 and $300 a month per child beginning in July 2021. Parents then claimed the rest of the credit when they filed their 2021 tax return.
But Congress decided not to continue the expanded child tax credit program for 2022. That means the child tax credit reverted back to $2,000 per eligible child for the 2022 tax year and was not paid out in advance monthly installments.
The reduced child tax credit means parents will likely see a smaller refund in 2023 compared to last year, the IRS says.
How to claim the $2,000 child tax credit
Families can claim the full $2,000 child tax credit when filing their 2022 return, but only up to $1,500 of the credit is refundable, according to TurboTax. That means the child tax credit can reduce what you owe in taxes to zero, but if you don’t owe anything, you can only get up to $1,500 back as a refund.
The increased credit under the American Rescue Plan was fully refundable.
According to TurboTax, there are seven “tests” you’ll need to pass to claim the child tax credit this year: Age, relationship, support, dependent, citizenship, residence and family income:
Age: The child must have been under age 17 at the end of 2022.
Relationship: The child must be your own, a stepchild or a foster child placed with you by a court or authorized agency. You can also claim your siblings, stepsiblings, nieces, nephews and grandchildren if they meet all of the other requirements.
Support: The child cannot have provided more than half of their own financial support in 2022.
Dependent: You have to claim the child as a dependent on your 2022 tax return. The requirements for claiming a child as a dependent are available on the IRS website.
Citizenship: The child must be a U.S. citizen, U.S. national or a U.S. resident alien.
Residence: The child must have lived with you for more than half of 2022. But there are several exceptions for children born in 2022, temporary absences due to school, business, medical care, military service or other special circumstances, and for children of divorced or separated parents.
Family income: The child tax credit is reduced if your modified adjusted gross income (MAGI) is above certain amounts. Married couples filing jointly with an MAGI greater than $400,000 and individuals with an MAGI greater than $200,000 will have their child tax credit amount reduced by $50 for each $1,000 they earn over those limits. Families also need to have earned at least $2,500 in 2022 to be eligible for the child tax credit.
Parents can claim the child tax credit by entering their children and other dependents on their Form 1040 income tax return and attaching a completed Schedule 8812, Credit for Qualifying Children and Other Dependents, the IRS says.