The child tax credit and the child and dependent care credit are both reverting back to previous levels, meaning that many parents could see smaller tax refunds this year according to IRS.
The child tax credit is a tax break for eligible families with children. In 2021, the credit was increased to $3,600 for children aged 5 and under and $3,000 for those ages 6-17 according to King 5, but it has since reverted back to $2,000 per eligible child for the 2022 tax year. While families can claim the full amount of the credit, it is not fully refundable, meaning it can only reduce a tax bill to zero, not result in a tax refund.
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However, there is a way to receive some of the unused child tax credits as a refund. The Additional Child Tax Credit allows families to claim up to $1,400 of the leftover child tax credit per dependent. To be eligible for the child tax credit, families must pass seven tests, including age, relationship, dependent status, residency, financial support, citizenship, and income. There are also income requirements that families must meet, with a modified adjusted gross income of over $400,000 for married couples and $200,000 for other filing statuses potentially reducing the credit for each $1,000 earned over the limit. On the other hand, families need to have an earned income of at least $2,500 to receive the credit on their tax return.
In conclusion, the changes to the child tax credit in 2023 could have a significant impact on families’ tax returns. It is important to understand the eligibility requirements and how the credit may affect a tax bill. By knowing the ins and outs of the child tax credit, families can ensure they receive the maximum benefits available to them.
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