The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000.
Read more: Child Tax Credit: Updates in 2022
For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
However, the funds for the Child Tax Credit may be reduced from $3.5 trillion to roughly $1.9 trillion in order to pass by a simple majority vote.
The expanded CTC, which provided monthly advance payments of $250 per child 6 and over and $300 per child under 6 to qualified families, is set to expire in December 2021. The new legislation would have extended the program for four years.
However, now these benefits could expire in just one year.
The child tax credit for 2021 is based on your 2019 and 2020 tax returns, which means if your income situation changed during 2021, it’s possible you might be on the hook to the IRS come tax time.
This is because, in order to qualify for the child tax credit, the only main requirement has been meeting the income threshold which is $75,000 and under filing single and $150,000 and under filing jointly.
If your income surpassed these thresholds in 2021, but you began receiving child tax credit payments in July, then it is possible that you will have to pay back the money you received during next year at tax time, as you are no longer eligible.
The U.S. Census Bureau’s Household Pulse Survey found that 55% of advance CTC recipients spent their money on food, 26% spent it on clothing for their kids and 23% spent it on school and after school costs.
With the reduction of CTC, more American residents may suffer increased financial insecurity in the coming years.
Read more updates here at the East County Gazette.