The tax filing season is upon us. In just a few short weeks, the IRS will start accepting 2021 tax returns. Some people will collect a refund, while others will get a bill. While the government has been known to extend various tax credits to taxpayers to help lower their taxable income, many people are still confused about the child tax credit.
How much will parents be able to collect in child tax credits when they file their 2021 taxes in 2022? Will the government be extending the advanced child tax credit payments into 2022?
Some parents will receive a larger child tax credit than others when they file their 2021 taxes in 2022.
Each year, come tax time, a majority of parents with minor children are permitted to claim the child tax credit when they file their taxes. In 2020, the child tax credit was $2,000 per qualifying child and the credit was applied to your taxes when you filed in 2021.
However, the American Rescue Plan increased the child tax credit to $3,600 per child under the age of 6 and $3,000 per child between the ages of 6 and 17 (the age limit was previously set to 16). Couples who earned $150,000 combined or single parents who earned $112,500 are eligible to collect the child tax credit.
In addition to increasing the child tax credit, the government also gave the IRS the green light to disburse half of the child tax credit to parents in monthly installments beginning on July 15, 2021. This means that parents with children under the age of 6 were entitled to receive $300 per child each month up until December 2021 and $250 per child between the ages of 6 and 17.
Advance payments of the child tax credit could lower your refund amount in 2022.
Parents who didn't opt-out of receiving the advance payment of their 2021 child tax credit will now only be entitled to collect the other half when they file their taxes in 2021. This means that parents will only be able to collect a child tax credit of $1,800 per child under the age of 6 and $1,500 for children aged 6–17.
Parents who did opt-out of receiving advance payments of the child tax credit will be entitled to the full credit of $3,600 per child under the age of 6 and $3,000 for children between the ages of 6 and 17.
Anyone who had a child in 2021 and didn't get the opportunity to collect any advance payments of the child tax credit will also be entitled to the full amount when they file their 2021 taxes.
Will parents be able to collect their 2022 child tax credit in monthly installments?
The early payments of the 2021 child tax credit have helped many families stay afloat and keep children out of poverty. President Joe Biden’s Build Back Better Act is pushing to extend advance payments of the child tax credit into 2022. While the House has passed Biden’s $1.75 trillion plan, the Senate hasn't agreed to extend the child tax credit payments in 2022 yet, but there’s still hope.
If the Senate votes in favor of extending advance payments of the child tax credit in 2022 and parents choose to receive monthly installments beginning in January 2022, they might not be entitled to collect any child tax credit when it's time for them to file their 2022 taxes in 2023.