Requirements to receive up to $2,000 Child Tax Credit in 2023
After the 2021 Child Tax Credit ended in December, the IRS has reverted to its pre-pandemic version for families in need.
Over the past few years, much has been made of the Child Tax Credit, and in 2023 we will see it continue at the same level offered before the expansion of the credit passed through the American Rescue Plan.
How much is the Child Tax Credit in 2023?
The amount of the credit is smaller, and eligibility is more restricted than in 2021, because of the rules established through the 2017 Tax Cuts and Jobs Act (TCJA). These changes will be in effect through the 2025 fiscal year if Congress does not modify the credit before then.
In 2021, the ARP made big changes to the credit for one year that helped many families by allowing them to receive half of the value of the credit over six months rather than as a bulk sum when they file their taxes. The remaining half of the credit was then claimed when filing their tax return, which increased the number of total returns processed by the IRS.
Like last year, taxpayers with eligible children can claim a credit worth up to $2,000 per child. This year the credit is partially refundable, and there is an earnings threshold to start claiming the up to $1,500 portion known as the “Additional Child Tax Credit.”
Taxpayers who owe less in taxes than the refundable amount will have it added to their tax refund, and the non-refundable portion will reduce taxes owed dollar-for-dollar. To claim a refund, filers must complete Schedule 8812.
What children are eligible for the 2022 Child Tax Credit?
The 2023 Child Tax Credit is available to parents with dependents under 17 as of 31 December 2022 and who meet certain eligibility requirements. Under the enhanced credit, children aged 17 were eligible for the full amount of the much larger 2021 Child Tax Credit.
For tax years 2022 through 2025, the child must be eligible to be claimed as a dependent on the taxpayer’s return and live at the same residence as the taxpayer for more than half the year. The child cannot provide more than half of their own financial support during the tax year.
The child must have a valid taxpayer identification number in the form of a work-authorized Social Security number (SSN). Before the TCJA and under the 2021 souped-up version, taxpayers could claim children with individual taxpayer identification numbers (ITIN) issued by the IRS, not the Social Security Administration. This meant that documented immigrants and permanent residents were able to claim the credit as well.
Taxpayer income requirements to claim the 2022 Child Tax Credit
Parents of eligible children must have an adjusted gross income (AGI) of less than $200,000 for single filers and $400,000 for married filing jointly to claim the full credit. For every $1,000, or fraction thereof, over those thresholds, the credit is reduced by $50.
For lower-income Americans, they must have an income of at least $2,500 to be eligible for the refundable portion of the credit. The amount that can be claimed is a portion of earnings above that threshold. To calculate how much can be claimed, you need to subtract $2,500 from your “earned income”, for example, Social Security benefits and unemployment compensation do not count, and then multiply that number by 15 percent.
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