The Child Tax Credit (Updated for 2022)

This 2022 Child Tax Credit article has been updated for the 2022 tax year. There were some notable pandemic-related changes to the Child Tax Credit in the 2021 tax year with the American Rescue Plan Act of 2021, with a fairly significant new Child Tax Credit expansion (see 2021 Child Tax Credit payment details here) and the creation of a Child Tax Credit portal for taxpayers. For the 2022 Child Tax Credit, 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).

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, which is much more valuable than a deduction (a subtraction from your actual income). And this tax credit has the potential to be partially refundable, which means you could get money back and not just a subtraction of taxes owed.

Child Tax Credit

The 2022 Child Tax Credit Amount

The 2022 Child Tax Credit is $2,000 per qualifying child and is refundable up to $1,400, subject to income phaseouts. While down from the temporarily increased 2021 levels, the amount is still higher than the $1,000 amount, prior to the 2018 tax reform.

The Child Tax Credit amount that may be refunded is equal to 15% of earned income (see my post on the earned income tax credit, which can be claimed separately as well) above $2,500. That amount is capped, and subject to income phaseouts. Previously, the Child Tax Credit was only refundable if you filed for the “Additional Child Tax Credit”.

2022 Child Tax Credit Income Levels & Phaseout

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 reduce or 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, you will need to file a tax return in order to claim the 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 also want to submit IRS Schedule 8812.

The best tax software will help you 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):

  1. H&R Block
  2. TurboTax
  3. TaxSlayer
  4. TaxAct

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. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  • 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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