HomeNewsIs the Increased Child Tax Credit Gone for 2022?

Is the Increased Child Tax Credit Gone for 2022?

The American Rescue Plan was enacted into law almost exactly one year ago today. The big relief bill not only sent stimulus payments to Americans’ bank accounts but also increased a vital tax credit — the Child Tax Credit — to help them pay for their children’s education.

A maximum of $2,000 per kid was available under the Child Tax Credit prior to 2021, with a partial refund available up until that time. In other words, if an individual or family claiming the credit owed the IRS no money, they would not be able to collect the whole $2,000.

 

The credit, like all other tax credits, was only available in a single lump-sum payment in the form of a tax refund.

The Child Tax Credit received a number of significant improvements last year. First, the maximum value for children aged 6 to 17 was increased to $3,000, and the maximum value for children under the age of 6 was increased to $3,600.

The increased Child Tax Credit was also made completely refundable and half of it was paid out in monthly payments beginning in July and ending in December, with the remainder paid out in lump sums in January.

The increased Child Tax Credit was such a success that politicians attempted to make it permanent in the first instance. President Biden then reached an agreement on a one-year extension for 2022 and incorporated that phrase into his Build Back Better strategy.

Nonetheless, at the moment, Build Back Better is stuck in the Senate, and a major cause of dispute has been the increase in the Child Tax Credit. In reality, many who relied on the improved credit last year were already forced to make it through the month of January without making an installment payment on their debt.

What should families expect from the upcoming school year? Should the enhanced Child Tax Credit be phased out completely, as some argue? Is there still a glimmer of hope?

Plan for the best-case scenario while hoping for the best.

President Biden continues to support the expansion of the Child Tax Credit through 2022. However, at this point, he is facing strong resistance from Democratic Senator Joe Manchin, and the credit is unlikely to be approved in a divided Senate unless Manchin agrees to change his position.

That doesn’t rule out Biden coming up with a novel solution to get an increase to the credit past the Senate.

Right now, there are discussions about breaking up the enormous Build Back Better bill into smaller pieces so that cash may be dedicated to other important measures that aren’t as contentious as the increased Child Tax Credit, for example.

However, it is possible that lawmakers will be able to incorporate the expanded credit into another bill, or that they will be able to bring it ahead on their own through other means.

At the moment, though, it is not something families can rely on to happen. Households that relied on that credit last year may be better served by reworking their budgets, if at all possible, and attempting to find ways to increase their incomes instead. It may be necessary to work additional shifts or take on side jobs in order to make ends meet.

The tax credit hasn’t been eliminated entirely.

While the increased Child Tax Credit may not be available until 2022, the credit itself will not be phased out until then.

It is possible that the credit will be reduced to its previous value and that it would be payable as a lump payment during the tax-filing season the following year in the worst-case situation. Although this is not ideal, it is preferable that the credit be canceled entirely.

In addition, many households that received installment payments for enhanced credit last year may still be eligible for monies when they file their 2021 tax returns if they have not already done so.

Anyone in that situation should consider filing their tax return as early as possible this year to accelerate their refund.

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