Inflation has already been a burden for many individuals and families, and it seems that tax refunds will add to the financial stress this year. Two tax credits that helped to support parents during the pandemic have been reduced, resulting in a decrease in the amount of financial assistance available to them.
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The child and dependent care credit, which is intended to help working parents pay for child care, was raised to a maximum of $4,000 for one qualifying individual and $8,000 for two. As a refundable tax credit, it could still be claimed even if no tax was owed or no income was reported. However, the expanded tax credit, which was implemented as part of the American Rescue Plan Act of 2021, has now been reduced to a nonrefundable maximum of $1,050 for one individual and $2,100 for two.
Another credit that was beneficial for parents last year, the child tax credit, has also seen a reduction. The credit has fallen back to $2,000 for children of all ages, whereas in 2021, it was $3,600 for children under the age of 6 and $3,000 for children between the ages of 6 and 17.
These reductions in tax credits are particularly unfortunate for parents, as they come at a time when inflation is already putting a strain on their finances. It is important for taxpayers to be aware of these changes and to plan accordingly when it comes to their tax refunds. Keeping informed about changes in tax laws and regulations is crucial in making the most of available financial benefits and minimizing the impact of any reductions.