Many taxpayers may find that their refunds for the 2022 tax year are smaller or the amount due is larger than for 2021. Here are some of the main changes in the tax law between 2021 and 2022 that may explain this.
- Child Tax Credit
In 2021, the CTC was $3,600 for children 5 yrs and younger, and $3,000 for children between the ages of 6 and 17. The credit was fully refundable, and it was often paid in advance. In 2022, the CTC is only $2,000, and is only available for children 16 yrs and younger. It is only partially refundable for certain taxpayers (and not at all for others), and it is not paid in advance.
- Child and Dependent Care Credit
In 2021, the CDCC was available for up to 50% of a maximum of $8,000 of expenses for one child (and $16,000 of expenses for 2 or more children). It was fully refundable, and it was not phased out until higher income levels. The credit could be as high as $8,000.
In 2022, the CDCC is available for up to 35% of a maximum of $3,000 of expenses for one child ($6,000 for 2 or more children). It is not refundable, and it begins to phase out at much lower levels of income. The maximum credit has dropped to $2,100.
- Earned Income Tax Credit
In 2021, taxpayers 19 years and older could claim the EITC. The maximum credit for a childless worker was $1,502, and the maximum credit for families with 3 or more children was $6,728.
In 2022, a stricter age requirement (25-65 yrs old) applies to taxpayers claiming the EITC if they have no qualifying children. The maximum credit for a childless worker drops to $560. However, the maximum credit for families with 3 or more children increases to $6,935. The rule permitting a calculation based on 2019 earned income, if favorable, has been eliminated.
- Recovery Rebate Credit
In 2021, taxpayers and children entitled to Third Round Stimulus Payments of $1,400 each received a refundable Recovery Rebate Credit to the extent they did not receive the stimulus payments. In 2022 there have been no stimulus payments, and therefore no recovery rebate credits.
- Charitable gift deduction
In 2021, taxpayers who did not itemize could still claim a $300 deduction for any cash donations to charities during the year. In 2022, taxpayers may only claim deductions for charitable donations if they itemize.
- Flexible spending accounts for dependent care
In 2021, taxpayers could claim deductions for up to $10,500 in contributions to a dependent care FSA. o In 2022, this limit has been reduced to $5,000.
The Child Tax Credit helps families with qualifying children get a tax break. You may be able to claim the credit even if you don’t normally file a tax return.
You can claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States.
To be a qualifying child for the 2021 tax year, your dependent generally must:
- Be under age 18 at the end of the year
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew)
- Provide no more than half of their own financial support during the year
- Have lived with you for more than half the year
- Be properly claimed as your dependent on your tax return
- Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid
- Have been a U.S. citizen, U.S. national or U.S. resident alien
You qualify for the full amount of the 2021 Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than:
- $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
- $112,500 if you are filing as a head of household; or
- $75,000 if you are a single filer or are married and filing a separate return.
Parents and guardians with higher incomes may be eligible to claim a partial credit.
Use our Interactive Tax Assistant to check if you qualify.