The big tax perks after the pandemic are reduced this year. Parents won’t be getting checks, but they will still have a (smaller) credit to use against taxes owed.
The Child Tax Credit was boosted for the 2021 tax year to $3,600 for children younger than 5 and $3,000 for kids 6 to 17. For the 2022 tax year, the child tax credit will drop to $2,000 for all children 16 and under. Some low-income earners may receive a partial tax credit of up to $1,500. Children 17 years of age no longer generate a tax credit.
The Child and Dependent tax credit was also boosted in 2021 to a max of 50% of costs up to $8,000 per child (max 2 kids) but will drop in 2022 to a max of 35% up to $3,000 per child (max 2 kids). Last year, the credit was fully refundable, but for 2022 it’s non-refundable.
Further, tax deductions for charitable gifts will also be less generous. When the pandemic was still in full swing, many Americans depended on charities for food and other vital services. In response, lawmakers increased incentives to make cash donations, but those are expiring. So if you’re used to giving, for better or worse, tax authorities may be taking more this time around.
The Earned Income Tax Credit was also expanded in 2021, but is set to decline in 2022. For the 2021 tax year, the qualifying age dropped from 25 to 19, but it’ll now return to 25. The maximum EITC credit for childless workers will also decline from $1,502 to $560.