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Child Tax Credit: Requirements, Proposed Changes

The child tax credit is a $2,000 benefit available to those with dependent children under 17. An expanded credit may come this tax season, but the IRS encourages taxpayers to file now if they're ready.
Tina Orem
Sabrina Parys
By Sabrina Parys and  Tina Orem 
Updated
Edited by Arielle O'Shea

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The child tax credit (CTC) is a federal tax benefit that plays an important role in providing financial support for taxpayers with children. This year, the CTC has been in the news as lawmakers work to expand the credit.

The Tax Relief for American Families and Workers Act of 2024, a piece of nonpartisan legislation that aims to modify the benefit, was passed by the House of Representatives on Jan. 31 and is headed to the Senate for further consideration.

The uncertainty surrounding the expansion bill has many people wondering whether to press "pause" on their returns. Filers should continue with business as usual per the IRS: “Taxpayers should not wait for this legislation to file their returns," Danny Werfel, the IRS commissioner, said in a Feb. 15 hearing.

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What is the child tax credit?

The current child tax credit is a nonrefundable tax credit available to taxpayers with dependent children under the age of 17. The credit can reduce your tax bill on a dollar-for-dollar basis, potentially eliminating your tax bill altogether. Some taxpayers may also be eligible for a partial refund of the credit through what's called the “additional child tax credit" (ACTC).

To qualify, taxpayers and their children must meet certain eligibility criteria that take into account the child's age, as well as their relationship to the person claiming them.

Taxpayers must also meet income thresholds to take full advantage of the benefit because the credit phases out for high earners. Once your modified adjusted gross income exceeds the income limit, the credit amount you get may be smaller, or you may be deemed ineligible

Internal Revenue Service. Child Tax Credit. Accessed Mar 14, 2023.
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How much is the 2023 child tax credit?

Child tax credit 2023 (taxes filed in 2024)

For 2023, the child tax credit is worth $2,000 per qualifying dependent child if your modified adjusted gross income is $400,000 or below (married filing jointly) or $200,000 or below (all other filers). The refundable portion, also known as the additional child tax credit, is worth up to $1,600

Internal Revenue Service. Rev. Proc. 2022-38. Accessed May 31, 2023.
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If your MAGI exceeds the above limits, your credit gets reduced by $50 for each $1,000 that your income exceeds the threshold.

Child tax credit 2024

For the 2024 tax year (tax returns filed in 2025), the child tax credit will be worth $2,000 per qualifying child, with $1,700 being potentially refundable through the additional child tax credit.

Child tax credit expansion: What the new tax deal could mean for you

If passed in its current format, the child tax credit expansion would temporarily extend significant benefits to lower-income families and those who are often unable to reap the full benefits of this tax credit.

  • The maximum refundable amount per child — currently capped at $1,600 — would increase to $1,800 for 2023 taxes filed in 2024. In tax years 2024 and 2025, the refundable child tax credit amount would grow to $1,900 and $2,000.

  • The math behind the refundability would change beginning with tax returns filed this year until the tax year 2025. Parents and caretakers would be allowed to factor in how many children they have when determining the total credit amount they are eligible for, leading to a more equitable credit amount

    .

  • To qualify for the refundable version of the child tax credit, filers must earn at least $2,500. In tax years 2024 and 2025 (taxes filed in 2025 and 2026), filers could use their earned income from either the current year or the prior year to meet this requirement. This is especially significant for many lower-income families who might not otherwise qualify because they earned too little in a given year.

  • If passed, most major tax software programs will be updated to reflect the new maximum refundable amount per child.

Outside the changes listed above, the base child tax credit, which is currently worth $2,000 per qualifying child, would be indexed for inflation for tax years 2024 and 2025. This could amount to a roughly $100 increase in the credit each year depending on the rate of inflation, according to Eric Bronnenkant, a New York-based CPA and head of tax at Betterment.

If I claim the child tax credit, should I file taxes now or wait?

"The IRS reminds taxpayers eligible for the Child Tax Credit that they should not wait to file their 2023 tax return this filing season," the agency says on its website

. The agency says it is monitoring the legislation and will automatically make adjustments for eligible taxpayers if the bill is signed into law.

How quickly could the IRS implement the child tax credit expansion?

The IRS estimates that only 10% of filers may be eligible for a slight adjustment to their refunds if the child tax credit expansion bill passes in its current form

United States House Committee on Ways & Means. IRS Commissioner Confirms Child Tax Credit Refunds Will Be Sent Within Weeks. Accessed Feb 20, 2024.
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IRS commissioner Werfel confirmed in a hearing on Feb. 15 that the agency would attempt to recalculate and issue any necessary refunds as quickly as six weeks after the bill passes: “It will be a top priority to make sure that this gets done.”

If a taxpayer has already filed their return and is eligible for an additional refund under the new child tax credit rules, they will not need to refile to submit an amended return, Werfel said

United States House Committee on Ways & Means. Hearing with Commissioner of the Internal Revenue Service, Daniel Werfel. Accessed Feb 20, 2024.
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Requirements: Who qualifies for the child tax credit?

Taxpayers can claim the child tax credit for the 2023 tax year when they file their tax returns in 2024. Generally, there are seven “tests” you and your qualifying child need to pass: age, relationship, dependent status, residency, financial support, citizenship and income.

  1. Age: Your child must have been under the age of 17 at the end of 2023.

  2. Relationship: The child you’re claiming must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any of those people (e.g., a grandchild, niece or nephew).

  3. Dependent status: You must be able to properly claim the child as a dependent. The child also cannot file a joint tax return, unless they file it to claim a refund of withheld income taxes or estimated taxes paid.

  4. Residency: The child you’re claiming must have lived with you for at least half the year (there are some exceptions to this rule).

  5. Financial support: You must have provided at least half of the child’s support during the last year. In other words, if your qualified child financially supported themselves for more than six months, they’re likely considered not qualified.

  6. Citizenship: Per the IRS, your child must be a "U.S. citizen, U.S. national or U.S. resident alien," and must hold a valid Social Security number.

  7. Income: Parents or caregivers claiming the credit also typically can’t exceed certain income requirements. Depending on how much your income exceeds that threshold, the credit gets incrementally reduced until it is eliminated.

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Additional child tax credit

If you qualify for the CTC but can't take full advantage because you don't owe taxes or owe less than your credit amount, you may be able to get a partial refund by claiming the additional child tax credit. To claim the ACTC, all of the above income and dependent criteria must be met, but there are also a few more rules:

The IRS figures your additional child tax credit amount by multiplying your earned income above $2,500 by 15%. You can claim that number or however much of the CTC credit you were entitled to but couldn’t fully use, whichever number is less. But keep in mind that the maximum refund you can get for the 2023 tax year is capped at $1,600 per qualifying dependent.

If you have three or more dependent children, the math can be more complex. See Schedule 8812 for more details.

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How to claim the child tax credit in 2024

For tax year 2023, you can claim the child tax credit and the additional child tax credit on the federal tax return (Form 1040 or 1040-SR) that you file by April 15, 2024, or by October 2024, with a tax extension.

You’ll also need to fill out Schedule 8812 (“Credits for Qualifying Children and Other Dependents”), which is submitted with your 1040. This schedule will help you to figure out your child tax credit amount and how much of the partial refund you may be able to claim if applicable.

Most quality tax software guides you through claiming the child tax credit with a series of interview questions, simplifying the process and even auto-filling the forms on your behalf. If your income falls below a certain threshold, you might also be able to get free tax software through IRS’ Free File.

When to expect your child tax credit refund

By law, the IRS can't release a refund for a return claiming the additional child tax credit until mid-February. Early filers who used direct deposit as their refund method, e-file, and submitted an error-free return could see refunds hitting their accounts by Feb. 27, 2024, says the IRS

.

If you filed by paper, the wait times generally increase. The agency's "Where's My Refund" tool can also help you get of sense of what's going on with your funds.

» Curious about what other credits you may qualify for? Here's a list of 22 common tax deductions and breaks

Consequences of a child tax credit error

An error on your tax form can mean delays on your refund or on the child tax credit part of your refund. In some cases, it can also mean the IRS could deny the entire credit.

If the IRS denies your CTC claim:

  • You must pay back any CTC amount you’ve been paid in error, plus interest.

  • You might need to file Form 8862, "Information To Claim Certain Credits After Disallowance," before you can claim the CTC again.

  • If the IRS determines that your claim for the credit is erroneous, you may be on the hook for a penalty of up to 20% of the credit amount claimed.

State child tax credits

In addition to the federal child tax credit, a few states, including California, Colorado, and New York, also offer their own state-level CTCs that you may be able to claim when filing your state return. Visit your state's department of taxation website for more details

Tax Credits for Workers and Their Families. State Tax Credits. Accessed Jul 14, 2023.
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What is the $500 credit for other dependents (ODC)?

If your child or a relative you care for doesn't quite meet the criteria for the CTC but you are able to claim them as a dependent, you may be eligible for a $500 nonrefundable credit called the "credit for other dependents." The IRS has a tool that can help you to determine if your dependent qualifies

.

Child tax credit vs. child and dependent care credit

Although similar sounding, the child tax credit and the child and dependent care credit are not the same thing. The child tax credit is a tax incentive for people with children, while the child and dependent care credit is another tax credit for working parents or caretakers designed to help offset expenses such as day camp or after-school care. Both credits have different rules and qualifications.

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