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Substantial Tax Benefits Available in 2022

April 8, 2022
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Prepared by the Office of Danny K. Davis

Congress included substantial tax credits for 2022 as part of the American Rescue Plan enacted last year.  Importantly, thousands of dollars in credits are available to eligible low-income workers and parents even if they do not owe any federal taxes.  I fought for these benefits, and I need your help getting the word out so that people get every penny for which they’re eligible.

It is worth the time to file. 

 

  • For individual workers without kids, the maximum Earned Income Tax Credit (EITC) is $1,502.  For a working parent, the maximum EITC is $3,618 (1 child), $5,980 (2 kids), or $6,728 (3+ kids).  The EITC is available if you earn just $1 and whether you work full-time, part-time, as an employee, as a contractor, or are paid in cash.  This year, workers as young as 19 and older workers of any age are eligible. Also, foster/homeless youth are eligible at age 18 or as full-time students under age 24.

  • For parents, the Child Tax Credit gives $3,600per child aged 0-5 & $3,000per child aged 6-17.  

  • For working parents paying childcare, the Child and Dependent Care Tax Credit reimburses up to $4,000 for 1 child or up to $8,000 for 2+ children based on your childcare costs. 

  • For education/job training, the American Opportunity Tax Credit gives up to $2,500 per student for tuition, fees, and course materials for 4 years or the Lifetime Learning Credit is up to $2,000.

Useful Tax Resources. 

  • Check your numbers for accuracy.  Not sure what you received in advanced Child Tax Credit or  stimulus? Check your IRS online account or letters (Letter 6419 for advance CTC payments; letter 6475 for Economic Impact Payments).  https://www.irs.gov/payments/your-online-account

  • If your 2020 tax return is still in processing, enter $0 for last year’s Adjusted Gross Income (AGI) when you file electronically for 2021. If you used the IRS Non-Filer Sign Up tool in 2021 to register for the Child Tax Credits or Economic Impact Payments, enter $1 for last year’s AGI.

  • IRS Free File.  If taxpayers earned less than $73,000, they can use Free File Program.

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

  • Need Help Resolving a Tax Issue with the IRS? Contact a Low Income Tax Clinic

https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2020/07/p4134.pdf

Child and Dependent Care Tax Credit

Reimburses Working Families for Childcare Costs

Prepared by the Office of Danny K. Davis

Rep. Davis fought for years to substantially increase the reimbursement to working caregivers for the high costs of childcare.  Affordable, reliable childcare is one of the biggest expenses for working families.  Thanks to the American Rescue Plan, families can receive up to $8,000 back on their taxes.

What Is the Child and Dependent Care Tax Credit?

  1. NEW! Families can receive up to $4,000 based on up to $8,000 in childcare expenses in 2021 for 1 child or up to $8,000 base on up to $16,000 in child care expenses in 2021 for 2 or more children.
     
  2. NEW!  There is no minimum income required to claim your Child and Dependent Care Tax Credit.

  1. The Child and Dependent Care Tax Credit is in addition to the Child Tax Credit.  YOU MAY BE ABLE TO CLAIM BOTH.

Who Can Receive the Child and Dependent Care Tax Credit?

  1. You’re eligible to receive the Child and Dependent Care Tax Credit if you: 
  • Have a child or dependent under the age of 13
  • Have an older dependent who is incapable of self-care
  • Paid out of pocket for childcare in 2021
  • Earned less than $425,000 and were working or looking for work in 2021

  1. There is no minimum income; you only need more income than childcare expenses

What Expenses Are Covered?

  1. Center-based or family-based care, caregivers (including babysitters, relatives, neighbors, or friends), and before or after care summer or vacation day camps.

How to Receive the Child and Dependent Care Tax Credit?

  1. TIP!  To receive Child and Dependent Care Tax Credit, you need to claim it on your taxes.  You can tell your tax preparer or fill out IRS Form 244.

  1. TIP!  You’ll need a record of your child care expenses for 2021, including your child care provider’s name, address, and tax ID number.

 Resources

  1. IRS Frequently Asked Questions about the Child and Dependent Tax Credit

https://www.irs.gov/newsroom/child-and-dependent-care-credit-faqs#claiming  

  • IRS Free File.  If taxpayers earned less than $73,000, they can use Free File Program.

https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

  • Volunteer Income Tax Assistance (VITA) Program provides free, in-person tax preparation if your income is less than 58,000 or if you have disability or limited English-language proficiency.

https://www.irs.gov/individuals/find-a-location-for-free-tax-prep

Tax Counseling for the Elderly (TCE) Program provides free filing help for individuals 60 and older.  https://www.aarp.org/money/taxes/aarp_taxaide/locations.html