If you have children and are a resident of the US, you probably noticed that there was a significant tax credit granted to you in 2021. Eligible families were granted between $3000 and $3600 per child last year in the form of a refundable tax credit, half of which was available to be paid in advance.
This has many people wondering, will the child tax credit continue into the next year? This is a question of particular interest to myself as my first child will be born in the second week of January 2022.
History of the Child Tax Credit?
Did you know that the Child Tax Credit has actually been around for 25 years? Started in 1997, it began as a $400 nonrefundable credit to qualifying families. (Nonrefundable means that if you paid less money in taxes than the credit is worth, the maximum amount of money you could receive would be the amount you paid in taxes that year.) In 1998 the limit was raised to $500. In 2021 it changed to be a refundable tax credit, meaning you would receive the full credit even if you didn’t pay any taxes that year.
In 2012 the credit was increased to $1000, and in 2017 the credit was doubled to $2000, with $1400 of that being refundable.
Finally, in 2021 under the American Rescue Plan the limit was temporarily raised to $360o for children under 6 and to $3000 for children under 17, with half the credit being paid out in advance payments throughout the year.
Will the Child Tax Credit Continue in 2022?
The answer is a qualified yes. Yes, the credit will continue into 2022, but under the current law it will not include the $3600 credit it did in 2021. The temporary increase set in 2021 was for that year only and in 2022 the credit reverts back to a $2000 limit. The advance payments will not be around in 2022 either.
There have been efforts to make the 2021 tax credit permanent, notably in the American Families Plan of 2021, but that bill struggled in Congress and is not likely to be approved.
What Other Options are Available?
If you are a resident of California, Colorado, Oklahoma, New York, Maryland, Maine, or Idaho, you may be in luck. These seven states all offer some form of a statewide child tax credit, although some have stricter eligibility requirements than the federal credit.
Hopefully, this answers your questions. While there will be a Child Tax Credit offered in 2022, it will not be as significant as the one offered in 2021, and that is not likely to change this year.
As always the information contained in this article represents my personal opinion and is in no way meant to be construed as legal or financial advice.2021 child tax credit