A federal state is trying to relieve parents financially.
- Many parents have struggled this year without the increased child allowance.
- New Jersey is introducing its own tax credit to provide relief at a time when the cost of living is soaring.
Last year, as the cost of living began to rise due to inflation, parents of children received some relief in the form of the increased federal child tax credit. Prior to 2021, the maximum child tax credit was $2,000 per child. Last year, that peak rose to $3,600 for children under 6 and $3,000 for children ages 6 to 17.
Some of the increased child allowance was also paid out in advance. Monthly installments go into recipients’ bank accounts from July to December last year.
Lawmakers had hoped to keep the improved child tax credit through 2022. And given that inflation has really spiked this year, it would have been a major financial lifeline for parents.
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But unfortunately, lawmakers failed to maintain the increased child tax credit, causing its previous peak to fall back to $2,000. And now, eligible parents can’t collect this year’s credit until they file their 2022 tax returns in 2023.
However, one state introduces its own child tax credit to relieve residents. And we could see other states follow a similar path.
A big boost for the parents
Just as many states have sent out stimulus checks this year in the absence of a fourth round of federal stimulus, one state is boosting its own child tax credit. However, the new loan is really only aimed at low-income earners – those who are most likely to struggle to keep up with their living expenses.
New Jersey is one of the more expensive states in the country, mainly due to high real estate prices and property taxes. However, the New Jersey legislature recognizes that without the improved federal child tax credit, some residents really struggle. That’s why New Jersey uses its own credit to make life in the Garden State more affordable.
The New Jersey Child Tax Credit is up to $500 per child under age 5. Residents earning $30,000 or less are eligible for full credit, and from then on the credit will expire as income increases. Individuals earning over $80,000 per year are not eligible for the New Jersey Child Tax Credit.
In addition, the state child allowance is not made available in installments. Rather, eligible recipients must claim the credit on their 2022 tax returns. So families shouldn’t expect that money to come in until next year.
Well, one good thing about the New Jersey child tax credit is that it’s fully refundable. If an Eligible Recipient is due for a $500 credit but does not owe any taxes, they will still receive their $500. Many federal tax credits are non-refundable, meaning the most they can do is reduce a given claimant’s tax bill to $0.
A modest dose of relief
The New Jersey child tax credit is not nearly as generous as the increased federal child tax credit approved for the 2021 tax year. But at a time when the cost of living is absolutely skyrocketing, residents will no doubt embrace any relief available to them with open arms.
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