What is the new Child Tax Credit alternative available in 2022?
The monthly payments from 2021 have finished but there is another, lesser-known federal programme which provides thousands of dollars to American families.
Last year President Biden failed to garner sufficient support for the Build Back Better bill, a huge legislative proposal that would have extended the Child Tax Credit boost for another year. The monthly support came to an end after the December payments and the credit has returned to its previous form.
Since then there has been no real progress made on Biden’s desire to reinstate the expanded Child Tax Credit, but there is another, lesser-known federal programme which could be worth up to $4,000 per child to eligible families.
What is the Child and Dependent Care Credit?
Childcare can be a major cost for parents and guardians and one which can sometimes prevent them from seeking work, to ensure that they can look after children. If you pay for a qualifying individual to allow you or your spouse to work, you could be eligible to receive up to $4,000 per child from the Child and Dependent Care Credit.
You can claim the credit when you come to file your tax returns this year, covering the 2021 tax year. For the first time ever the credit has been made fully refundable, meaning that there is no minimum earnings threshold to qualify. In the past claimants had to have paid a certain amount of federal income tax to get the full entitlement.
The IRS website states: “The amount of the credit is a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual.”
Who qualifies for the Child and Dependent Care Credit?
Earlier this week a group of Senate Democrats authored a public letter, accusing the Biden administration of failing to make families aware of the financial support that is available to them.
They wrote: “The Treasury Department and White House seem to have made no meaningful effort to raise awareness about the $4,000 per child CDCTC.”
Full details of the eligibility requirements and the application process to receive the support can be found on the IRS’ Child and Dependent Care Credit help page. To be the subject of a claim, the child or dependent must be at least one of the following:
- A dependent qualifying child aged below 13 when receiving the care
- A spouse who is either physically or mentally impaired and who lived with the claimant for at least half of the year
- An individual who is either physically or mentally impaired and who is either: a dependent; someone who could have been a dependent except that they received a gross income of $4,300 or more and so were ineligible