Your Free Guide to the Child Tax Credit

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Understanding the Child Tax Credit

The Child Tax Credit is a tax deduction that taxpayers can use to reduce the income tax that they pay each year. In most cases, parents of children from birth through age 16 may be able to deduct $2,000 per qualifying child from the amount that they owe on their income taxes when they file.

In order to qualify, the children must be dependents listed on the tax return, related to the taxpayer, living with the filing taxpayer for at least six months a year and be US citizens. If the filers do not owe taxes, a portion of the Child Tax Credit (up to $1,400) is refundable as long as the taxpayer earned at least $2,500 but less than $400,000 if filing jointly, or $200,000 if filing singly.

Since it is partially refundable, this means that you may qualify for a portion of the credit as a refund, even if you don’t owe any taxes for the 2022 tax year.

What Agency Is in Charge of the Child Tax Credit?

Since the Child Tax Credit is a deduction on your federal income taxes, everything relating to the Child Tax Credit is administered by the Internal Revenue Service (IRS), the taxing agency of the federal government.

The IRS determines your eligibility and the amount you will be getting. They use the data they have on taxpayers from their previous years’ tax returns to make an initial determination of eligibility for the Child Tax Credit.

However, if your family or income circumstances have substantially changed, you do have the opportunity to inform the IRS so that they can make the appropriate changes. In addition to deciding who is eligible to receive the Child Tax Credit payments, the IRS is also responsible for distributing the money directly to American taxpayers.

Determining Your Eligibility

To be eligible, you must have one or more dependent children who:

Are under age 17 for the entirety of 2022
Have a valid Social Security number
Live with you for at least six months during the year
Are US citizens
And you must have earned less than certain income limits (see the section “How Much Money Do You Qualify to Receive?” below)

Most of the people who qualify for the Child Tax Credit in 2022 are taxpayers who have previously claimed the Child Tax Credit on their returns. When you claim a child as a dependent on your tax return, you input the child’s birth date. Because of this, the IRS knows the age of your children and will know if they meet the age requirements.

The IRS looks first at your tax return for 2021. If you did not file in 2021 or you did file but the IRS has not yet processed your return, they will look at your 2020 tax return to see if you claimed any dependent children who may still have been 16 or younger at the end of 2022.

If you have previously claimed the Child Tax Credit on recent tax returns or are otherwise considered to be eligible by the IRS, you should receive several letters from the IRS in the mail. If you do not receive these letters, it may indicate that the IRS does not consider you eligible to receive the Child Tax Credit, even if you do qualify.

For example, if you have not filed a tax return for 2021 or 2020, the IRS will not have records on you that it can refer to. Likewise, if you have had a new baby or adopted a child since you filed your last tax return, the IRS has no way to know this. If this is the case, you can register yourself with the IRS’ Child Tax Credit Non-filer Sign-up Tool at https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool.

How Much Money Can You Qualify to Receive?

To know what to expect, you can calculate the amount you can receive based on your income. The income that the IRS uses to calculate the amount of your tax credit is based on your modified adjusted gross income (MAGI).

The MAGI can be found on your previous year’s tax return, form 1040, line 7. It also includes the amounts of any of the following that apply to you:

Deductions you took for IRA contributions and taxable Social Security payments
Foreign income you had excluded
Interest from any EE savings bonds you used to pay college tuition
Losses from a partnership
Passive income or loss
Rental losses
Adoption expenses

For most people, their modified adjusted gross income is the same as their adjusted gross income since the add-backs do not apply to them.

Most qualifying taxpayers receive up to $2,000 per child under the age of 17. However, the amount you get is reduced based on your income. The more you earn, the lower the amount of the Child Tax Credit.

There is an income benchmark at which the Child Tax Credit is reduced. For every $1,000 you earn over the income benchmark, your Child Tax Credit is reduced by $50 per qualifying child.

The benchmark in place for 2022 taxes is if you earn more than:

$200,000, or
$400,000 if filing a joint return.

You can use the Interactive Tax Assistant provided by the IRS to help determine if you may qualify: https://www.irs.gov/help/ita/does-my-childdependent-qualify-for-the-child-tax-credit-or-the-credit-for-other-dependents

How and When You Will Receive the Money

To claim the Child Tax Credit, you’ll need to provide information about your children and other dependents on Form 1040, U.S. Individual Income Tax Return. You can find a copy of this form from the IRS here: https://www.irs.gov/forms-pubs/about-form-1040

You’ll also need to attach Schedule 8812, Credits for Qualifying Children and Other Dependents. You can find a copy of this form from the IRS here: https://www.irs.gov/forms-pubs/about-schedule-8812-form-1040

If you qualify, you’ll see a credit for the total amount on your tax return. Unlike in 2021, taxpayers will not receive any of these payments in advance. The CTC for tax year 2022 has reverted back to its previous form, which means it appears only as a tax credit. However, up to $1,400 is refundable, for those who expect to receive a refund from the IRS.

If you are owed a tax refund, how you get this money depends on how you choose to receive refunds. You can sign up for direct deposit, in which case your refund will be deposited directly into your bank account. Otherwise, you can receive a check in the mail.

You can set up or change your direct deposit information or address that the IRS has on file for you by going on the IRS’ Child Tax Credit Update Portal at https://www.irs.gov/credits-deductions/child-tax-credit-update-portal.