2022 TAX SEASON

How much do you get back in taxes for a child in 2021?

Taxpayers can begin sending the IRS their 2021 tax returns on 24 January, those with children will have potentially thousands of dollars to claim.

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How much do you get back in taxes for a child in 2021?
CARLO ALLEGRI REUTERS

Filing taxes has never been at the top of activities people are passionate about doing but in 2022 that may change, especially for taxpayers with children. The American Rescue Plan passed by Democrats in March 2021, besides sending a third round of stimulus checks, tweaked several tax credits.

Eligible taxpayers can take advantage of thousands of dollars in tax credits if they have children through the 2021 Child Tax Credit, Child and Dependent Care Credit and the Earned Income Tax Credit. Also, those that welcomed a new member to the family in 2021 could potentially see another $1,400 stimulus check. Here’s a look at the tax credits available.

$1,400 Recovery Rebate Credit for third stimulus check

Parents that welcomed a new member, or members, to their family in 2021 might be able to claim a $1,400 third Economic Impact Payment, better known as the third round of stimulus checks. On 2021 tax returns you can claim the amount that your newborn or adopted child would have received had the IRS known about their existence when the $1,400 payments were sent out.

You will need to use the 2021 Recovery Rebate Credit to claim those funds. If you failed to receive the first two rounds of stimulus payments, you will need to file a 1040 form for 2020 to claim the 2020 Recovery Rebate Credit.

2021 Child Tax Credit worth up to $3,600

Eligible parents that didn’t opt out should have already received monthly payments from the enhanced Child Tax Credit for the 2021 fiscal year. But those payments only represented half of the total credit they could be eligible for. The remaining portion of the credit for each child under age 17 can be claimed on 2021 tax returns.

Not everyone chose to receive the advance payments on the credit and some families that aren’t required to file tax returns never got signed up. These taxpayers will be able to claim the full amount they are due when they file this spring.

In either situation, taxpayers with children could be looking at a healthy tax refund in 2022 with just the 2021 Child Tax Credit. Eligible parents can claim up to $3,600 for every child under the age of six and up to $3,000 per child six to 17 years old at the end of 2021.

Those taxpayers that received the monthly installments as part of the advance payment scheme will need to subtract the amount they received in 2021 from the total they are eligible to claim. The IRS has sent letters to recipients, but taxpayers can also check how much they received using your IRS Online Account.

Child and Dependent Care Credit worth up $8,000

For parents that incur expenses to have their child looked after so that they can go to work, look for work or study, may be able to get up to $8,000 knocked off their tax bill. Even better, the American Rescue Plan made the credit fully refundable in 2021. So, if you owe less in taxes than the amount of the credit you can claim, you’ll see a larger tax refund this year.

One hitch, you need to have kept all your receipts for the expenses you wish to claim on the credit. Also the math on this credit is also a little tricky and there are rules for eligibility.

Individuals or households with earnings up to $125,000 will be able to claim 50 percent of up to $8,000 paid toward having their one child or dependent cared for, so that would equate to a credit of $4,000. If you have two or more children the amount of expenses you can claim doubles to $16,000, making the maximum refundable credit $8,000.

Earned Income Tax Credit amount varies on size of family

The American Rescue Plan expanded eligibility for the Earned Income Tax Credit (EITC) so that even those without children can claim the credit. The EITC is targeted at household with low to moderate incomes. The amount that you can claim depends on your income and how many children or dependents you claim on your tax return.