Tax season is upon us, but for parents, its set to feel slightly different than the last few years, namely due to the conclusion of the American Rescue Plan. So, what can parents expect when filing their 2022 tax return? We caught up with Lisa Greene-Lewis, a tax expert and CPA for TurboTax, to get the full scoop.
Lisa Greene-Lewis has over 20 years experience in tax preparation. She is an expert at interpreting tax laws so that her clients understand them.
Under the American Rescue Plan, all eligible families received a boost in 2021 via the Child Tax Credit (up to $3,600 per dependent kids under six years old and up to $3,000 for kids ages six and up). For 2022, the tax credit is back to pre-pandemic levels—clocking in at up to $2,000 for dependents under age 17. Eligibility depends on your income level, of course—the credit goes to families who earn up to $200,000 as a single taxpayer or head of household or up to $400,000 if you are a married couple filing jointly. (As a point of comparison, a family with two kids in 2021 could have received up to $7,200, but in 2022, could receive a max of $4,000—a significant change.)
Per Greene-Lewis, it’s well-known that the Child and Dependent Care credit (which helps anyone who pays for childcare) took a huge leap in 2021, maxing out a whopping up to $8,000 credit for families with two or more kids and up to $4,000 for families with one child. But once again, these benefits expired at the end of last year. For tax year 2022, the credit will return to pre-pandemic levels (up to $2,100 if you have two or more kids and up to $1,050 if you have one child).
This particular credit is helpful to lower and moderate-income families, but for 2022, you can no longer pull from previous year’s income to help you qualify. In other words, in 2021, it was fine to draw from your 2019 tax return to determine eligibility, but that’s no longer the case.
One of the most impactful forms of COVID relief came in the form of stimulus payments for eligible families with the last such payment of $1,400 being distributed automatically in March 2021. But if you didn’t get it, you had the option to instead claim it as a recovery rebate credit on your 2021 tax return, which reduced your overall tax bill in 2022—and often led to a bigger refund. Alas, there were no stimulus payments in 2022, which means you can’t expect that recovery rebate credit in 2023.
