The child tax credit amount that can be refunded to taxpayers is referred to as the supplementary child tax credit. Families with a tax liability to the IRS that was less than the amount of their eligible child tax credit might file for it. Because the child tax credit is non-refundable, the taxpayer could get a refund of the amount of the child tax credit that was not used, thanks to the additional child tax credit. The Tax Cuts and Jobs Act does away with this provision beginning in 2018 and continuing until 2025. (TCJA). Yet, the TCJA incorporates several provisions for refundable credits within the child tax credit.
An Overview of The Additional Child Tax Credit
The tax credit is a monetary reduction in tax obligation granted to qualifying taxpayers. If Susan owes $5,550 in taxes, she is eligible for a $2,500 tax credit, bringing her total tax obligation down to $3,050. If taxpayers' tax credit is more than their tax liability, they are eligible for a refund. If Susan is eligible for a refund and her tax credit is $6,050, she will get a cheque for $500 ($6,050 minus $5,550).
A taxpayer's ability to claim a tax credit is determined by the tax bracket in which they are placed. For instance, taxpayers who also happen to be parents may be eligible for the Child Tax Credit, which provides some financial relief for those who are shouldering the financial burden of bringing up a family.
The child tax credit will lower tax obligations by up to $2,000 per child for qualifying filers from 2022 through 2025. The child or dependent must meet all of the following criteria to be eligible for the child tax credit:
- Be under the age of 16 by the end of the tax year
- Be a U.S. citizen, national, or resident alien • Have lived with the taxpayer for more than half of the tax year
- Be claimed as just a dependent on the federal tax return
- Not have provided and over half of their financial support
- Have a Social Security number
Additional Child Tax Credit Vs. Child Tax Credit
In the past, if a taxpayer's tax bill were lower than their credit, the IRS would not provide a refund for the difference.
39 If a family wishes to save any leftover credits from the child tax credit, they may claim the supplementary child tax credit.
If a family also qualifies for the non-refundable Child Tax Credit, they could be eligible for the refundable Additional Child Tax Credit. For those households whose tax liability was lower than their child tax credit refund, the additional child tax credit was a great option.
For 2022, if you have children who meet the criteria, the government may return up to $1,500 of your taxes.
With the help of the Child Tax Credit, some filers may have their tax bill reduced to zero. Yet some of this credit can be used as a refundable credit. The requirements for claiming any given tax credit are very uniform; what varies is when exactly on your tax return you get to use that credit.
Who May Get the Tax Credit For Children?
To qualify for the Child Tax Credit, a married couple's combined annual income must be less than $150,000— (and, by extension, a portion of the Additional Child Tax Credit). Eligible taxpayers are those who file as single filers or are heads of household and have an annual income of less than $112,50. Those with a different tax filing status and an annual income of less than $75,000 may also qualify.
Is There a Refund For The Additional Child Tax Credit?
The Child Tax Credit is not refundable; however, the Additional Child Tax Credit is. If your tax bill is lowered to zero, you may still get a refund from the IRS consisting of some of the Additional Child Tax Credit.
For How Much Longer Will Families Be Able to Benefit From A Larger Child Tax Credit?
Reduced Child Tax Credits have been in effect since the greater credit expired. As the epidemic hit, Congress passed stimulus legislation to double the Child Tax Credit temporarily. At the close of 2021, these terms had already been terminated.
Conclusion
In this case, the Child Tax Credit refundable element is the Additional Child Tax Credit. If person files Form 8812, they can claim the refundable Additional Child Tax Credit and the non-refundable Child Tax Credit to decrease their tax burden to zero. Although the legislation was in place that made this credit more generous in the past, those days are long gone.
