A new year means new tax changes to keep in mind for all filers. But parents need to be especially watchful of the tax changes affecting their families this year. The expanded Child Tax Credit and other changes will significantly impact tax returns filed by parents this year.
In partnership with TaxSlayer, let’s explore what parents need to know about filing their taxes in 2022. How do big changes like the Child Tax Credit impact things? And how can TaxSlayer help you file your tax return quickly and easily (and probably at the best price too)? Check out TaxSlayer here to get started >>
3 Tax Changes Affecting Parents This Year
America’s taxpayers typically navigate through a certain number of tax law changes each year. But the year 2021 brought major changes to the Child Tax Credit among other changes.
As a result, parents are likely to feel one of the biggest impacts when they go to file their returns in 2022. If you’re a parent claiming dependents, here’s what you need to know before you start preparing your return.
1. Expanded Child Tax Credit
The American Rescue Plan expanded the Child Tax Credit for 2021. Now, parents could be eligible for a tax credit of up to $3,600 per child aged 0 to 5 or $3,000 for each child aged 6 to 17.
The expanded credit is also fully refundable this year–which means you could receive some or all of that amount back in your tax refund. Not surprisingly, that could make a big impact on any family budget.
Note: You may have received a portion of the Advance Child Tax Credit in 2021, in the form of monthly installments from the IRS. The IRS began delivering these payments to eligible families in July, 2021 (unless you opted out) and continued distributing them through December.
Reconciling Your Child Tax Credit Payments
It’s important to note that when you file your 2021 return, you’re going to need to report any amount of Child Tax Credit you received monthly.
If you didn’t receive any Child Tax Credit payments in 2021 (or you purposely opted out), you may receive a bigger refund in 2022 because the credit is fully refundable. If, on the other hand, you did receive the advance payments, you could see a lower-than-expected tax refund in 2022.
Finally, if you received Child Tax Credit payments in error, you may need to pay back a portion (or all) of the credit.
This may all sound confusing. Fortunately, TaxSlayer makes it easy to determine if you’re eligible for the Child Tax Credit. When you go to file your return, simply follow TaxSlayer’s step-by-step guidance to enter your info and claim the amount you deserve.
Check out TaxSlayer here >>
Possibility Of No Advance Child Tax Credit Payments In 2022
It’s important to remember that the Advance Child Tax Credit was only for 2021. And as of January 2022, the Build Back Better spending bill, which would extend the Child Tax Credit, is sitting on Capitol Hill without the votes needed to pass. So, for now, the advance monthly payments have stopped.
If you were counting on the funds from the Child Tax Credit payments, you'll need to make changes to your budget quickly. Although things may change, it's highly possible that the expanded Child Tax Credit benefits won’t be in effect for 2022.
2. Stimulus Payments
Here’s another important reminder for families: Don’t forget to claim any missing Recovery Rebate payments (stimulus checks).
If you were eligible for the third payment and never got it or you received less than you were eligible for, then you need to file a tax return to claim what you’re owed. This is true even if you’re not typically required to file a tax return.
TaxSlayer will walk you through entering the information needed, including how much (if any) stimulus payments you received during 2021. You can also find this information on IRS Form 1444-C that should have been mailed to you.
Check out TaxSlayer here >>
3. Tax Status And Bracket Changes
Every year, tax brackets change slightly to account for inflation. You can check out the tax brackets for 2021 and 2022 here.
The IRS sets different income thresholds for taxes based on your filing status. These are the four tax filing statuses you may fall into:
- Head of household
- Married, filing jointly
- Married, filing separately
If you changed your filing status in 2021, you may see a change in your taxation based on your income.
For example, let’s say that on your last return you filed as "single" with an income of $45,000, landing you in the 22% marginal tax bracket. But you became a parent in 2021 and will file your next return as "head of household" instead. With a head of household status and a $45,000 income, your marginal tax rate would be 12%. So you may see a decrease in your tax liabilities and a larger refund.
There are a lot of changes this year with taxes - the biggest being the Child Tax Credit. And it can be confusing to navigate, especially for busy parents.
Consider using TaxSlayer to streamline your tax filing process as you navigate these changes. With the help of TaxSlayer, you can make sure to capitalize on any tax breaks coming your way and avoid spending extra hours researching on your own!
Check out TaxSlayer here and get started for free >>
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.