Making Sense of Child Tax Credits

You may be among the 36 million¹ U.S. parents of minor children who breathed a sigh of relief in 2021 because of the enhanced child tax credit (CTC).

The enhanced CTC increased tax rebates to families with children last year to promote financial security during the pandemic.  Recipients received a monthly check from Uncle Sam for six months and then a lump sum to help pay for childcare, food or other basic needs.

Many parents may already be missing the enhanced CTC, which expired this past December. It can be confusing figuring out what tax credits parents can still capitalize on and who qualifies for them. Here’s what you need to know about taking advantage of CTC tax rebates in 2022.

The Maximum CTC Has Decreased

For 2022 the maximum CTC is $2,000 for parents of children under 17.  That is down from a maximum of $3,600 in 2021. 

Note: Your minor child must have a social security number for your family to qualify for the CTC.

There Is a Silver Lining

The maximum tax credit may have decreased, but on the bright side, the modified adjusted gross income (MAGI) limits for the tax credit have increased.  Single tax filers making less than $200,000 and married couples filing jointly making combined earnings less than $400,000 are eligible in 2022.  That is up from $75,000 for single parents and $150,000 for married couples in 2021. After those thresholds, the credit phases out or decreases by $50 for every $1,000 over the maximum that a person earns. 

Requirements for Being Refundable Have Changed

Last year the tax credit was fully refundable, meaning that families who earned little or no income could still receive the rebate because there was no earnings minimum to qualify.  

In 2022, the tax credit will be refundable only up to $1,500, depending on your income, and you must have earned at least $2,500 to qualify for the refund.²  

Monthly Payments Are History

In 2022, recipients will receive their tax credit all at once after they file their taxes. Last year, eligible parents received half of the CTC in six monthly installments and the balance after they filed their taxes.

Check If Your State Provides Child Tax Payments

Thirteen states offer CTCs to supplement the federal CTC program. The amount of the rebate and eligibility requirements vary from state to state.  See a list of states that provide CTCs below:

• California
• Colorado
• Connecticut
• Idaho
• Maine
• Maryland
• Massachusetts
• New Jersey
• New Mexico
• New York
• Oklahoma
• Pennsylvania
• Vermont

If your state is listed above, check with your local department of tax and finance to find out if you qualify and how to take advantage of your state’s CTC.

Speak to your tax advisor for more information about child tax credits.

¹ “The Monthly Tax Credits are Done – Here’s What Replaces It” by Lance Lambert, January 26, 2022, Fortune magazine.

² “The Child Tax Credit: What’s Changing in 2022” by Chaunie Bruslie, May 16, 2022, Northwestern Mutual website, www.northwesternmutual.com/life-and-money/the-child-tax-credit-whats-changing-in-2022/.