The child tax credit is a tax benefit the federal government offers U.S. taxpayers with children.
Claiming child tax credits, family credits, and other deductions can decrease your overall tax liability or increase your tax refund.
What is the Child Tax Credit?
Child tax credits offer tax relief to families with dependent children under 17. However, to claim this tax credit, families must typically file a tax return, as it is through this process that eligibility and the credit amount are determined.
While child tax credits can reduce your tax bill and eliminate your tax liability, you may be eligible for a partial tax credit through the "additional child tax credit "(ACTC).
Additional Child Tax Credit
When you qualify for the child tax credit but owe less in taxes than the amount of the credit, you may be eligible for a refund through the Additional Child Tax Credit. It allows you to receive a portion of the credit as a refund, even if it exceeds your tax liability.
Adoption Tax Credit
You can get tax benefits for qualified adoption expenses for the adoption of an eligible child. For 2024, you can receive an adoption tax credit up to the qualified adoption expenses of $16,810.
The adoption tax credit is non-refundable and cannot exceed your tax liability. However, you can carry forward the excess credit amount for five years.
2024 Earned Income Tax Credit
The earned income tax credit (EITC) is another crucial tax credit for families and individuals with moderate to low incomes.
Being a refundable tax credit, EITC can help you receive a tax refund if you qualify.
For 2024, you can get earned income tax credit as follows.
| # of Qualifying Children | EITC Owed (2024) |
|---|---|
| 3 | $7,830 |
| 2 | $6,960 |
| 1 | $4,213 |
| Nil | $632 |
Child Tax Credit 2024
While the 2023 Child Tax Credit is worth $2,000, of which $1,600 is refundable, for the 2024 tax year ( return to be filed in 2025), the refundable portion of the tax credit will increase to $1,700.
Taxpayers with eligible children can take an additional $100 per child as a tax refund.
The child tax credit will likely remain $2,000 unless Congress makes legislative changes in the tax year.
Requirements to Qualify
To qualify for a child tax credit, taxpayers must meet income thresholds. Your tax benefit reduces as your modified gross income exceeds the income limit.
Taxpayers' children must meet specific eligibility criteria to gain the benefits. These are the seven criteria your child must meet:
- Age: They must be under 17 at the end of the qualifying year (2024).
- Relationship: They must be your daughter, son, foster child, stepchild, sister, brother, step-sister, step-brother, half-sister, half-brother, or descendants of these relations (niece, nephew, grandchild).
- Citizenship: Your child must have a valid social security number and be a U.S. national, U.S. citizen, or a U.S. resident alien.
- Dependent Claim: You must claim your child as your dependent in your tax return. That means they cannot file a joint tax return unless they claim a refund of estimated taxes paid or withheld income taxes.
- Residency Status: Your child must have lived with you for at least half a year.
- Financial Assistance: You must have provided at least half of the child support during last year. Your child will not qualify if they support themselves financially for more than six months in the previous year.
- Parent or Caregiver Income: To qualify, the income of the parent or caregiver must not exceed the provided thresholds. Your tax credit reduces incrementally if your income exceeds the threshold provided.
Takeaway
When you are a taxpayer with qualified children, and your income falls within the eligible threshold, you can take advantage of the child tax credit to lower your tax liability or receive increased tax refunds.