Tax Planning: Family & Education

21 Nov 2022 Tax Planning: Family & Education

Posted at 22:26h in Uncategorized by Don Breckenridge

View Family & Education Tax Planning Guide

Make tax savings a family tradition

Certain tax breaks for parents and others with dependents were temporarily expanded for 2021, and there are also many long-standing breaks that are available for 2022 and beyond. Be sure you and your family take advantage of all credits, deductions and other breaks that are available to you and make saving taxes a family tradition. There will not be advance payments of child tax credits at any point in 2022.

Child, dependent and adoption credits

Through 2025, the TCJA expands tax credits for families, doubling the child credit and adding a new “family” credit for dependents who don’t qualify for the child credit:

For each child under age 17 at the end of the tax year, you may be able to claim a $2,000 credit. The credit still phases out for higher-income taxpayers but the income ranges are much higher than before the TCJA. So more taxpayers are now benefiting from the credit.
For each qualifying dependent other than a qualifying child (such as a dependent
child over the age limit or a dependent elderly parent), you may be able to claim a $500 family credit. But it’s also subject to the income-based phaseout.

The American Rescue Plan Act (ARPA) enhanced the child credit for 2021:

It raised the eligibility age to under age 18 at the end of 2021.
It increased the credit to $3,000 per child, and to $3,600 per child under age 6 at the end of 2021.

However, the increased credit amount ($1,000 or $1,600) is subject to lower income phaseout.

The ARPA also required the IRS to provide taxpayers the option to receive advance payments (generally by direct deposit) equaling 50% of the IRS’s estimate of the taxpayer’s 2021 child tax credit from July 2021 through December 2021.

If you adopt, you may qualify for the adoption credit — or for an employer adoption assistance program income exclusion. Both are $14,890 for 2022 (up from $14,400 for 2021), but the credit is also subject to an income-based phaseout.