The Child Tax Credit was a credit intended to help families manage the cost of raising children. The credit provides parents with a tax rebate of $2000 (2022) per child. The credit is refundable so low-income families still benefit from the credit even though their actual tax liability may be less than the credit.
History of the Child Tax Credit
The amount of the child tax credit has changed over the years. For example, when the credit was first passed in 1997, the credit was $400 per child and that credit was non-refundable. Meaning that if you didn’t have at least a $400 tax liability you were not able to take the full credit. Compare that to 2022, the credit is now $2000 per child and the credit is refundable. Meaning that even if your tax liability is less than $2000, you’re still eligible for the credit and can receive a refund up to that $2000.
The amount of the child tax credit temporarily increased for a couple years. When congress passed Covid Relief legislation the child tax credit increased to $3600 per child. However, those special provisions have now ended, and the credit has return back to $2000 for 2022.
There are seven tests to determine whether someone qualifies for the child tax credit.
Age – child must be under 18 on the last day of the year.
Relationship – child must your own, a stepchild or an adopted child
Support – child cannot have provided more than half of their own support
Dependent – child must me the IRS criteria for being a dependent
Citizenship – child must be a US citizen, resident alien or US National
Residence – child must have lived in your household more than half of the year
Family income – the credit is reduced for incomes above a certain threshold
For more details about these qualifications click here.
Credit for Other Dependents
If you have dependents that do not meet the qualifications for the Child Tax Credit you may still be able to claim the Credit for Other Dependents. The credit is up to $500 per dependent for 2022.
Although maximum credit for the Credit for Other Dependents is $500. It’s a non-refundable credit. Therefore, it can only be claimed up to the limits of your tax liability. For example, if the amount of tax due is $400, the Credit for Other Dependents would be limited to $400.
Who Qualifies as an Other Dependent
Dependents age 17 or older.
Full time student dependents up to age 24.
Dependent parents or qualifying relatives who are supported by the taxpayer.
Dependents who live with the taxpayer but aren’t related to the taxpayer.
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