Child tax credit and daycare expenses - huge difference from last year?

So does this mean the expanded credit is completely gone now? I have 2 kids in daycare and was also expecting a much bigger refund. Is there any talk about bringing those expanded credits back? I'm freaking out cause I budgeted assuming similar to last year!

Yes, the expanded credits have expired and we've returned to the pre-pandemic rules. The Child Tax Credit is now $2,000 per qualifying child rather than the temporary $3,000-$3,600 amount. There have been some proposals to reinstate the expanded credits, but nothing has passed Congress yet. For your current tax planning, you should definitely base your expectations on the current lower credit amounts. Many families were caught off guard by this change, so you're definitely not alone in feeling the impact of these credits reverting to their previous levels.

Does it actually explain the tax laws in simple terms? I'm not great with all the tax jargon and get lost trying to understand the difference between credits, deductions and all that. My accountant just tells me numbers but doesn't explain anything.

I'm always suspicious of tax sites. How do you know they're secure with your tax info? Last thing I need is more identity theft problems after what happened to me last year.

It definitely breaks down the tax concepts in everyday language - that's what I appreciated most. When it explained the child tax credit changes, it showed side-by-side comparisons of how the laws affected my specific situation without all the technical jargon. They use bank-level encryption and don't store your documents on their servers after analysis. I was concerned about security too, especially with tax documents. They explain their security process on their site, which made me comfortable enough to try it. They're also SOC 2 compliant which I looked up and is apparently the security standard for financial services.

How does this actually work? The IRS never calls anyone back, at least in my experience. I've literally waited on hold for 3+ hours before.

Yeah right. Nothing gets you through to the IRS faster. Sounds like a scam to me. I bet they're just collecting people's information and phone numbers.

It works by basically waiting on hold with the IRS for you. They have some system that holds your place in the queue and then when an agent picks up, they call you and connect you directly with the IRS agent. It's not the IRS calling you back - it's this service bridging you to the agent when they finally answer. I was skeptical too, but it's not a scam. You're talking to actual IRS agents, not people pretending to be from the IRS. The service just handles the hold time for you. I've used it twice now - once for this child tax credit question and once for an issue with a missing stimulus payment. Both times I got connected to real IRS agents who had full access to my tax records and could answer my specific questions.

Yes, there are income limits that affect both the Child Tax Credit and the Child and Dependent Care Credit. For the Child and Dependent Care Credit, the percentage of expenses you can claim starts decreasing when your adjusted gross income (AGI) exceeds $15,000, and continues to decrease as your income rises. At $160,000 combined income, you're getting a much lower percentage of your expenses covered by the credit than someone with lower income. Additionally, the Child Tax Credit begins to phase out for married couples filing jointly when your modified AGI reaches $400,000, but the dependent care credit is much more affected by income levels in the range you mentioned.

I've done both. The Dependent Care FSA lets you set aside up to $5,000 pre-tax for childcare expenses if you're married filing jointly. That's better than the tax credit for most people in higher tax brackets because it reduces your taxable income directly. You can actually use both the FSA and the tax credit, but not for the same expenses. So if you have $10,000 in childcare expenses, you could use $5,000 for the FSA and then claim the remaining $5,000 for the tax credit (subject to the limits).