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What is the Child Tax Credit (CTC)?
The Child Tax Credit is a tax benefit designed to help families with the costs of raising children. It’s one of the most significant tax credits available to parents and guardians, offering financial relief by reducing the amount of federal income tax you owe. If the credit exceeds your tax liability, you may even receive a refund, depending on your income and eligibility.
How much is the Child Tax Credit?
For the tax year 2024, the Child Tax Credit is worth up to $2,000 per qualifying child under the age of 17. To claim the full credit, your modified adjusted gross income (MAGI) must be below $200,000 for single filers or $400,000 for married couples filing jointly. If your income exceeds these thresholds, the credit begins to phase out, reducing by $50 for every $1,000 above the limit.
In addition to the $2,000 credit, a portion of the Child Tax Credit is refundable for some taxpayers. Known as the Additional Child Tax Credit (ACTC), this refundable amount is up to $1,600 per child in 2024. This means that even if you don’t owe any taxes, you could still receive money back if you qualify.
Who qualifies for the Child Tax Credit?
To qualify for the Child Tax Credit, your child must meet several criteria. They must be under 17 years old at the end of the tax year, be a U.S. citizen, national, or resident alien, and have lived with you for more than half of the year. Additionally, the child must be claimed as a dependent on your tax return.
It’s important to note that the Child Tax Credit is separate from the Child and Dependent Care Credit, which helps cover expenses related to child care or care for a dependent with disabilities. While the CTC is based on the number of qualifying children, the Child and Dependent Care Credit is tied to the cost of care.
The rules for the Child Tax Credit can be complex, especially when it comes to determining eligibility and calculating the credit amount. For example, parents who are divorced or separated must follow specific guidelines to determine who can claim the credit. The IRS provides detailed information on their Child Tax Credit webpage to help taxpayers navigate these rules.
Another factor to consider is how the credit interacts with other tax benefits. For instance, if you’re eligible for the Earned Income Tax Credit (EITC), you can claim both the EITC and the Child Tax Credit on your tax return. However, the total tax benefits you receive will depend on your income and filing status.
The Child Tax Credit underwent temporary changes under the American Rescue Plan Act of 2021. While these changes are no longer in effect for 2024, it’s worth noting that they expanded the credit to $3,600 for children under 6 and $3,000 for children aged 6 to 17. The credit was also fully refundable, and payments were distributed monthly instead of being claimed at tax time. Though these enhancements expired, they highlight the potential for future adjustments to the Child Tax Credit.
Let’s file your taxes!
If you’re unsure about your eligibility or how to claim the Child Tax Credit, we can help you! At People’s Tax Advisors, it is our goal to make sure you’re claiming all the credits and deductions you’re entitled to and avoid common mistakes that could delay your refund or trigger an IRS audit.
Visit us at https://peoplestaxadvisors.com/ to set up your virtual appointment now!
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