Is the enhanced child tax credit over for 2022?

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Should parents write off that extra money for good?

Key points

  • The enhanced Child Tax Credit lifted millions of children out of poverty in 2022.
  • So far, the enhanced credit hasn’t come back into play, even though President Biden has pushed it.

Almost a year ago, the US bailout was enacted. This massive relief bill not only sent stimulus checks to Americans’ bank accounts, but also increased a major tax credit – the child tax credit.

Prior to 2021, the Child Tax Credit capped at $2,000 per child and was only partially refundable. This meant that if a household claiming the credit did not owe the IRS money, they could not collect their full $2,000. The credit, like other tax credits, was also only paid out as a lump sum as a tax refund.

Last year, the child tax credit received a number of key improvements. First, its value was increased to a maximum of $3,000 for children aged 6 to 17 and a maximum of $3,600 for children under 6. The enhanced child tax credit was also fully refundable, and half of it was paid in monthly installments. which started in July and ended in December.

The enhanced child tax credit did so much good that lawmakers first sought to make it permanent. President Biden then opted for a one-year extension to 2022 and wrote that language into his Build Back Better plan.

But at this point, Build Back Better has stalled in the Senate, and the beefed up child tax credit is a major source of contention. In fact, those who relied on the enhanced credit last year have already had to go through January with no installment payments.

What should families expect this year? Is it time to completely cancel the enhanced child tax credit? Or is there still hope?

Hope for the best but plan for the worst

President Biden still wants to offer the enhanced child tax credit for 2022. But at this point he faces strong opposition from Democratic Senator Joe Manchin, and without his approval the credit is unlikely to be approved in a divided Senate.

That doesn’t mean Biden won’t get creative and find another way to boost credit. Right now there is already talk of breaking up the huge Build Back Better bill so that funding can be allocated to other key initiatives that are not as controversial as the beefed up child tax credit. But lawmakers could successfully enshrine enhanced credit in another bill, or even push it forward on its own using other tactics.

Still, it’s not something families can count on at this point. A better bet might be for households that relied on this credit last year to rework their budgets, if possible, and try to find ways to boost their income. That could mean working extra shifts or taking side gigs to make ends meet.

The tax credit has not completely disappeared

While the boosted The child tax credit may not stay in place for 2022, the credit itself is not going away. In the worst-case scenario, the credit will revert to its previous value and be payable as a lump sum during next year’s tax filing season. It’s not ideal, but it’s better than losing the credit altogether.

Additionally, many households that received installments for the enhanced credit last year may still be eligible for the funds once they file their 2021 tax returns. Anyone in this boat should consider filing an application. early this year to speed up its repayment.

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