Kelly Bullis
Once upon a time, it was desired for Americans to have families. A mother, a father, and at least one little crumb-cruncher. It was understood by Congress that it is costly to have children, so they created the system of providing tax credits and other incentives to help pay for having them around underfoot, Child Tax Credit (CTC) being the foundation of it all. (There are also child care credits, adoption credits, education credits, earned income credits, as well as college savings plans.)
Today, I want to spend some time on just the CTC. Prior to COVID, the CTC was $2,000 for each qualifying child with up to $1,400 of that maximum credit being refundable.
To qualify for the CTC, the following six requirements must be met.
1) The child must have been under the age of 17 at the end of the tax year. 2) The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. Of course, an adopted child is considered “your own child.” 3) The child can’t have provided more than half of their own support during the tax year. 4) The child must qualify as your dependent under prior law. 5) The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. 6) Generally, the child must have lived with you for more than half of the tax year for which the CTC is being claimed.
The CTC is subject to a phase out rule. (The socialists and wealth-haters in Congress just can’t let a credit be for everybody!) Any married couple with Modified Adjusted Gross Income (MAGI) of less than $400,000 (single filers $200,000) gets the entire credit. Anything over those amounts is phased out at a rate of $50 per $1,000 of MAGI.
Now some of you might be saying, “Hey Kelly! I thought the credit was $3,000 and fully refundable.” My answer would be, “You are correct if you’re talking about the 2021 tax year only. For 2022, it all reverts back to prior COVID with the only change being the refundable portion goes up to $1,500. AND, starting in 2026, it is scheduled to change to only $1,000 per child.” Now, don’t you just love how Congress likes to mess things up? You just get used to one rule and they build in an automatic change.
Some in Congress are talking about restoring the rules of 2021 and trying to make them permanent. Probably no traction for that to happen during the 2023 Congressional session, but in 2024, an election year, there is a good chance this might become a popular change so Congress can go home and tell their voters how hard they are working for their district and hoping to get re-elected.
So there you have it. Go forth and multiply!
Have you heard? Psalm 127:3 says, “Behold, children are a heritage of Yahweh. The fruit of the womb is his reward.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.