With the easing of the global pandemic coupled with a rise in inflation, 2022 saw several broad financial changes that naturally resulted in changes to Americans’ annual taxes. Some of these changes were beneficial. For example, a shift in the tax brackets due to inflation or an increase in the standard deductions. Additionally, other changes have the potential to negatively impact a taxpayer’s bottom line.
One of the changes this past year was a sizeable reduction to a tax credit important to families across the board. We know it as the Child Tax Credit.
Enlisting in the services of a financial partner with expertise in tax preparation and planning is your best bet for navigating the many tax changes in 2022. Let’s discover the fundamentals of the Child Tax Credit. Also, we will explore what to expect during the 2023 tax season.
What is the Child Tax Credit?
According to the Internal Revenue Service, the Child Tax Credit helps families with qualifying children get a tax break. The credit can be claimed by entering all children and other dependents on Form 1040, U.S. Individual Income Tax Return. Additionally, you can also claim dependents with a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.
Who is Eligible for the Child Tax Credit?
To qualify for the Child Tax Credit for the tax year of 2022, taxpayers must meet the following requirements:
- Have a dependent that was under the age of 17 at the end of 2022.
- Have a dependent who is the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, or a niece or nephew).
- Have a dependent who provided no more than half of their own financial support during 2022.
- Have a dependent who lived with the taxpayer for more than six months out of the year.
- Have a dependent who was a U.S. citizen, U.S. national, or U.S. resident alien in 2022.
Bear in mind that there are other requirements, and a tax planning services provider can help ensure that you meet the criteria for the child tax credit.
What Are the Changes to Your 2023 Tax Return?
While several tax breaks for families were initiated during the height of the Coronavirus pandemic, these expanded credits diminished in the tax year of 2022.
The Child Tax Credit was certainly impacted, but so were additional and correlating credits, such as the Dependent Care Credit which provides tax breaks for daycare and other care services.
Changes to the Child Tax Credit
The Child Tax Credit was $3,000 for each child 6-17 and $3,600 for each child under the age of six during the height of the Coronavirus pandemic.
Now, that amount has been reduced to pre-pandemic levels, which equals $2,000 for every child who is 17 years old and younger. However, there are some limitations to this amount, such as income.
Additional Tax Credits to Ask About if You Are Eligible
Remember that this is not the only credit available to help ease your taxes and ensure a higher refund.
Additional family-oriented credits to investigate include, (but are certainly not limited to), the following:
- Child and Dependent Care Credit – Families that paid for childcare services, such as daycare.
- Earned Income Tax Credit -The Earned Income Tax Credit is aimed at low-to-moderate income taxpayers that have worked and earned income under $59,187, among other qualifications.
- Adoption Credit and Adoption Assistance Programs – There are several tax benefits regarding adoption expenses, including common costs like attorney fees or traveling expenses.
- Education credits – There are also numerous credits and tax benefits when it comes to education expenses for dependents, such as tuition, fees, and other education-related costs.
Navigate These Changes with Our Professional Tax Advisors at Saddock Advisory
At Saddock Advisory, we have a stellar reputation for Dallas financial services, and financial services – including tax preparations and planning – for families throughout the country and beyond.
2022 was a unique year that ushered in a world of changes regarding tax credits and annual tax returns. That is why the smartest move you can make going forward is to enlist expert assistance.
The Child Tax Credit is just one minor example of the numerous changes taxpayers can expect come April 2023.
Reach out to the experts at Saddock Advisory today to ensure your tax return for 2022 avoids potential pitfalls. Make the most out of opportunities that will put hard-earned income back into your pocket.
