Managing your family budget isn’t always easy. And since the pandemic, the federal government has been offering parents a much-needed financial boost — including with the Child Tax Credit. Which, reminder, helps families tackle the cost of children through a dollar-for-dollar discount on their tax bill. (And we all know kids can be $$$.)
But in 2023, it’ll look a lot different than it did over the past two years. Which means families may need to brace themselves for a smaller refund than they might have gotten in the past.
Back up. When did the child tax credit start?
It was first signed into law in 1997 and in 2021, got a major makeover. Thanks to the American Rescue Plan Act, which did a few things: It increased the credit parents could get from $2,000 to $3,600. Made it fully refundable (meaning you could claim the full credit even if it was greater than what you owed). And allowed more families to access the benefit. But how it generally works has largely stayed the same over the years: Parents can get a tax credit for each dependent they claim. (Not to be confused with a tax deduction, which shrinks your bill by reducing your taxable income.)
Were the changes to the child tax credit extended to 2023?
Sorry, parents, but they weren’t. This year, the old rules apply. Meaning: You can only get a max of $2,000 for each dependent. And you’ll still need to meet IRS requirements to get the credit:
The dependent has to be 17 or younger.
They also have to be your child (foster and step-children count too), a sibling, or a descendent of one of those people.
They can't file their own tax return.
They had to have lived with you for at least six months of the year.
They have to be a US citizen.
You had to have financially supported the dependent for at least six months of the year.
And your income can't exceed $200,000 if you're a single filer — and $400,000 if you're married and joint filing.
The expanded Child Tax Credit lifted millions of children out of poverty in 2021. But the Child Tax Credit extension many were hoping for in 2023 isn’t happening. So your best bet is to adjust your budget and be prepared that your tax credit will likely be lower this year.
Updated on Jan. 13 to reflect the latest on the Child Tax Credit.
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