Don't Mess With Taxes

The Child Tax Credit (CTC) has been one of the most popular since its creation as part of the 1997 Taxpayer Relief Act. Since its $400 per child origin, the credit has increased notably.

During the COVID-19 pandemic, the American Rescue Act bumped up the CTC in 2021 to a potential maximum of $3,600 per each child younger than age 6, and $3,000 per child up to age 17. The Internal Revenue Service also sent the credit amounts to qualifying amounts directly to eligible families so they didn’t have to wait until tax filing season to claim the funds.

The coronavirus-increased CTC expired at the end of 2021, and the tax break amount reverted to the law’s previous payment levels starting in 2022.

Politics and the CTC: Since then, Congress has tried, but failed, to increase the CTC and/or restore the credit to the COVID levels. The latest effort was via the bipartisan the tax bill overwhelmingly approved by the House in January, but killed by the Senate on Aug. 1.

Now, the CTC has become a presidential campaign topic. Republican Vice Presidential nominee JD Vance has voiced support for a $5,000 per child CTC. Vice President Kamala Harris, the Democrat’s presidential nominee, upped the CTC she would like enacted to $6,000 for parents of newborns.

It’s possible that a lame-duck Congress could take another stab at the tax bill. However, the more likely Washington, D.C., situation is that a larger, or not, family tax break will get sorted out after November’s votes are tallied and a new commander-in-chief and Congress are seated.

And that means taxpayers with children will be claiming the CTC during the 2025 filing season based on the current law. Here’s a look at the tax credit and how to claim it.

2024 CTC amount: For the 2024 tax year, the Child Tax Credit is $2,000 per eligible child.

As a tax credit, the amount will offset any tax liability dollar-for-dollar. But the CTC also is partially refundable, meaning that if your credit exceeds the tax you owe, you could get some of it back as a refund.

The refundable amount for the 2024 tax year comes into play if you qualify for the Additional Child Tax Credit (ACTC). This component for the 2024 tax year makes possible up to $1,700 per child to be refundable.

This year’s refundable amount is slightly more than it was in 2023. It was increased from that year’s $1,600 maximum when the IRS made released its annual inflation adjustments for the 2024 taxes.

So how do you get any or all of the CTC? As with many federal tax breaks, you have to do some calculating, taking into account your income, filing status, and how many children qualify as your dependent so that you can claim the tax credit for them.

CTC income limits: The CTC was created to help lower- and middle-income families offset the costs of child rearing.

To ensure those families get the credit help, the CTC begins phasing out once your earnings, specifically your modified adjusted gross income (MAGI), reach a certain level for your filing status.

The phase-out kicks in when your income amounts for the 2024 tax year are more than —

• $200,000 for a single, head of household, or qualifying widow/widower filers;
• $400,000 for taxpayers who are married and file a joint tax return; and
• $200,000 for married, filing separately taxpayers.

Children eligibility rules: To claim a child for CTC purposes, the youngster must several requirements. They are, by category, listed below.

• Age — The child must be younger than age 17 at the end of the tax year for which the CTC is claimed.
• Relationship — The child must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these, for example, a grandchild, niece, or nephew. 
• Dependent — The child must be claimed as a dependent on your tax return.
• Financial support — A claimed child must not provide more than half of their financial support during the year. 
• Residency — Any child you claim under the CTC must have lived with you for more than half the tax year. 
• Citizenship — The child also must have been a U.S. citizen, U.S. national, or U.S. resident alien during the tax year.
• Filing status — The dependent child cannot file a joint return with a spouse unless the filing is to claim a refund of withheld income taxes or estimated taxes paid.

If you want to make sure your child meets the requirements for you claim the CTC, you can use the IRS’ online Interactive Tax Assistant. It will tell you whether the young person qualifies you for the CTC, or whether you should instead claim the tax Credit for Other Dependents.

Claiming the CTC and ACTC: Claiming the Child Tax Credit is a two-step process.

First, you enter your children or other qualifying dependents on your Form 1040, U.S. Individual Income Tax Return. Then complete and attach Schedule 8812, Credits for Qualifying Children and Other Dependents.

Page 1 of Schedule 8812 is for claiming the basic Child Tax Credit. But if you qualify for the refundable portion of the CTC, you get that money by filling out the schedule’s Part II-A on page 2, shown below.

See more tax forms and more about them at Tax Forms 2024.

I know. It’s a bit complicated. But don’t ignore if you qualify. You don’t want to surrender any tax money for which you qualify.

Your tax preparer will take care of the claim. This includes Volunteer Income Tax Assistance (VITA) preparers who help, at no cost, qualifying taxpayers file their returns.

If you’re doing your taxes on your own using tax prep software, it will walk you through the CTC and ACTC claim process.

You also might find these items of interest:

• 6 family-friendly tax credits
• Childcare tax credits for both employers and working parents
• 2.9 million children escaped poverty in 2021 thanks to expanded Child Tax Credit
• Don't overlook the EITC, a valuable refundable tax credit that often goes unclaimed

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