The Child Tax Credit provides a $2,000 benefit to families with dependent children under the age of 17. For the 2024 tax season, up to $1,600 of the credit could be refundable.
The Child Tax Credit (CTC) is a federal tax benefit that provides financial assistance to taxpayers with children. This year, the credit has been in the spotlight as lawmakers attempted—but ultimately failed—to expand it for the 2024 filing season.
As a result, the tax break remained unchanged as filers scrambled to file their taxes by the April 15 deadline: parents with children under 17 may claim up to $2,000 per qualifying dependant, with $1,600 of that amount possibly refundable.
What is the child tax credit?
The current Child Tax Credit is a nonrefundable tax credit provided to taxpayers with dependent children under the age of seventeen. This credit can reduce your tax liability on a dollar for dollar basis. Some taxpayers may be eligible for a partial return of the credit under the “Additional Child Tax Credit.”
To be eligible, taxpayers and their children must meet specific conditions, including the child’s age and relationship to the claimant. Taxpayers must also meet income requirements, as the credit phased out for high incomes. If your modified adjusted gross income exceeds the threshold for the state of your filing, the credit amount may reduce or you may become ineligible.
Value of the Child Tax Credit
Child Tax Credit 2023.
In 2023, the kid Tax Credit was worth $2,000 per qualified dependent kid if your modified adjusted gross income was $400,000 or less (married filing jointly) or $200,000 or less (other filers). If your MAGI exceeded these limitations, your credit was decreased by $50 for each $1,000 you earned beyond the level.
The refundable component, referred to as the Additional Child Tax Credit, was valued up to $1,600.
Child Tax Credit 2024
For the 2024 tax year (tax returns filed in 2025), the kid Tax Credit will be $2,000 per qualified kid, with $1,700 potentially recoverable through the Additional Child Tax Credit.
Requirements: Who is eligible for the Child Tax Credit?
Taxpayers can claim the Child Tax Credit when they file their annual returns. Generally, you and your eligible child must satisfy seven “tests”: age, relationship, dependent status, residency, financial support, citizenship, and income.
- Age: Your child must be under 17 at the conclusion of the tax year.
- Connections: The child must be your son, daughter, stepchild, adoptive child, sibling, half-sibling, stepsibling, or a relative of any of these (for example, a granddaughter, niece, or nephew).
- Dependent Status: You must be eligible to claim the child as a dependent. The child cannot file a joint tax return unless they are claiming a refund of withheld income taxes.
- Residency: The child must have lived with you for at least half a year (exceptions apply).
- Financial Support: You must have supplied at least half of the child’s support this year.
- Citizenship: The child must be a US citizen, national, or resident alien with a valid Social Security number.
- Income: Parents or caregivers claiming the credit are often limited to specified income levels. Depending on how much your salary surpasses this threshold, the credit is gradually lowered until it is completely abolished.
How to claim the Child Tax Credit
For the 2023 tax year, you can claim the Child Tax Credit and the Additional Child Tax Credit on your federal tax return (Form 1040 or 1040-SR), which is due by April 15, 2024, or Oct. 15, 2024 with a tax extension.
In addition, you must complete Schedule 8812 (“Credits for Qualifying Children and Other Dependents”) and submit it together with your 1040. This plan assists you in determining your credit amount and any partial return you may be eligible for.
Most high-quality tax software walks you through claiming the Child Tax Credit with interview questions, simplifying the procedure and auto-filling paperwork. If your income is below a specific threshold, you may be eligible for free tax software through the IRS’s Free File program.
Additional Child Tax Credit.
If you qualify for the CTC but are unable to use the entire benefit because you do not owe taxes or owe less than the credit amount, you may be able to obtain a partial refund by claiming the Additional Child Tax Credit. To claim the ACTC, all of the aforementioned income and dependent conditions must be met; however, extra rules apply:
- You must earn at least $2,500 and have three or more qualified dependents.
- Earned income is often derived from jobs or self-employment, rather than passive sources such as dividends, pensions, welfare, or unemployment.
- You or your spouse (if filing jointly) cannot deduct foreign-earned income from taxes using Form 2555 or Form 2555-EZ.
- The IRS calculates the additional child tax credit by multiplying your earned income over $2,500 by 15%. You can claim that amount or the amount of CTC credit you were entitled to but were unable to fully spend, whichever is less. The maximum refund for the 2023 tax year is $1,600 per qualified dependent.
- If you have three or more dependent children, the computation becomes more complex. See Schedule 8812 for more information.
When Can You Expect Your Child Tax Credit Refund?
By law, the IRS cannot issue a refund for a return claiming the Additional Child Tax Credit until mid-February. Early filers who used direct deposit, e-file, and submitted an error-free return should receive refunds by February 27, 2024, at the most.
Paper filers often have greater wait periods. The “Where’s My Refund” function can help you check the status of your return.
2024 Child Tax Credit News Update
The Tax Relief for American Families and Workers Act of 2024, a bipartisan bill aimed at modifying the Child Tax Credit, passed the House of Representatives on January 31 but has since stalled in the Senate. The bill’s future is unknown.
If passed in its current form, the increase would provide major benefits to lower-income families, who frequently do not receive the entire credit.
During the previous filing season, the maximum refundable amount was $1,600 per dependent. The refundable amount for tax years 2024 and 2025 will be increased to $1,900 and $2,000, respectively.
The base Child Tax Credit, which is presently worth $2,000 per eligible child, would be updated for inflation in tax years 2024 and 2025, potentially increasing by around $100 each year.
From 2024 to 2025, filers might achieve the $2,500 minimum income threshold with either their current or previous year’s earned income. This is especially important for lower-income families, who may not normally qualify due to low wages in a given year.
Implementation of the Child Tax Credit Expansion.
If the law passes in 2024, the IRS anticipates that only 10% of filers will see a little modification to their returns. In a hearing on Feb. 15, IRS Commissioner Danny Werfel stated that the agency would endeavor to recalculate and issue refunds within six weeks of passage: “It will be a top priority to ensure this is completed swiftly.”
Implications of a Child Tax Credit Error
Errors on your tax form can cause a delay in receiving your return or the Child Tax Credit part thereof. In certain situations, the IRS may refuse the entire credit.
If the IRS denied your CTC claim:
You must reimburse any CTC funds received in error, plus interest.
You may need to complete Form 8862, “Information to Claim Certain Credits After Disallowance,” before reclaiming the CTC.
If the IRS finds your claim incorrect, you could face a penalty of up to 20% of the claimed credit amount.
State Child Tax Credits
In addition to the federal Child Tax Credit, numerous states, notably California, Colorado, and New York, provide state-specific CTCs. For more information, go to your state’s department of taxation website.
The $500 credit for other dependents (ODC)
If your child or a relative you care for does not fulfill the requirements for the CTC but can be claimed as a dependent, you may be eligible for a $500 nonrefundable credit known as the “Credit for Other Dependents.” The IRS provides a tool to help you assess whether your dependent qualifies. Visit Cnet for more!
Child Tax Credit against Child and Dependent Care Credit.
The Child Tax Credit and the Child and Dependent Care Credit are not the same thing, despite their similar names. The Child Tax Credit provides a tax break for families with children, whilst the Child and Dependent Care Credit helps working parents or caregivers cover expenses such as day camp or after-school care. Both credits have separate regulations and requirements.