United States

Individual - Other tax credits and incentives

Last reviewed - 20 January 2023

Child tax credit

Citizens, resident aliens, and non-resident aliens may claim a child tax credit if the child is a resident of the United States. The American Rescue Plan amended P.L. 115-97 to extend eligibility to a child 17 years old and younger. The American Families Plan increased the credit to USD 3,000 per child for dependants ages 6 through 17 and USD 3,600 for dependants age 5 and under. The American Rescue Plan made the credit fully refundable for 2021 (before this year, the refundable portion was limited to USD 1,400 per child). Under P.L. 115-97, if the child has not reached the age of 17 by the end of the year, a tax credit is allowed for up to USD 2,000 per child (of which up to USD 1,400 is refundable). The amount of the credit is reduced once the taxpayer’s income reaches USD 150,000 for married filing jointly, USD 75,000 for singles, and USD 112,500 for all others. P.L. 115-97 also provided a USD 500 (per dependant) non-refundable credit for a qualifying dependant other than a qualified child. At the time of this writing, the 2022 child tax credit is set to decrease to USD 2,000 for each dependant age 17 and under.

Child and dependant care credit

The American Rescue Plan increased the 2021 tax-year benefits of the child and dependant care credit. Dependant care expenses paid up to USD 8,000 for a child under the age of 13 are creditable at a 50% rate for one child, and expenses paid up to USD 16,000 are creditable at a 50% rate for two or more children. The credit is fully refundable. 

New Markets Tax Credit (NMTC)

The NMTC Program, enacted by Congress as part of the Community Renewal Tax Relief Act of 2000, is a non-permanent tax credit required to be renewed during each session of Congress. It permits individual and corporate taxpayers to receive a credit against federal income taxes for making Qualified Equity Investments (QEIs) in qualified community development entities (CDEs). P.L. 115-97 preserved the NMTC's existing authorisation.

Other tax credits

Numerous other tax credits exist at the federal, state, and local levels to provide an incentive for certain actions. Thus, determining if one or more of these credits would apply to a taxpayer would require a review of multiple sources of tax law.