What is Child Tax Credit?
Child Tax Credit is Unlocking Financial Support:
Understanding Child Tax Credit USA 2024 a tax benefit given to American taxpayers with children under 17 years of age by the end of the year. For the 2023 tax year (filed in 2024), the credit is $2,000 for each eligible child.
If you earn up to $200,000 as a single filer or up to $400,000 as a joint filer, you qualify for the full amount for each child. The benefit phase-out for high-income parents has been discontinued.
This benefit has returned to pre-2021 levels after two years, during which emergency legislation related to the COVID-19 pandemic increased the benefit to up to $3,000 per child and up to $3,600 for children under 6 years old.
Key Takeaways:
Child Tax Credit is a tax benefit of $2,000 per child, claimed by filing Form 1040 and attaching Schedule 8812 to the return.
To qualify for the credit, the dependent child must generally be under 17 years of age and have a Social Security number.
The complete advantage is accessible to individuals earning no more than $400,000 when filing jointly or $200,000 for single filers.
It phases out at higher income levels.
Up to $1,600 in credit for the 2023 tax year can be refunded, which increases to $1,700 in 2024.
How Child Tax Credit Works:
Child Tax Credit reduces taxpayers’ total tax on a dollar-for-dollar basis. (This is better than a tax deduction, which reduces taxable income and typically results in smaller savings.)
To claim the credit, you must have a Social Security number for the dependent child. By filing Form 1040 along with Schedule 8812, you can claim the credit for eligible children and other dependents.
If the dependent child or children meet the following qualifications, the credit is available:
- They are under 17 years of age at the end of the tax year.
They are a child, stepchild, foster child, sibling, step-sibling, half-sibling, or a descendant of any of these family members.
If they’ve resided with you for over half of the year and haven’t contributed more than half of their own financial support, then they meet the criteria.
You have claimed them as dependents on your taxes.
They are American citizens, nationals, or resident aliens.
How to Claim Child Tax Credit:
Some low-income earners may hesitate to file taxes because they know they owe no money. This can be a mistake for several reasons.
It’s necessary for everyone except the lowest-income earners to file a tax return. However, it’s also important to note that you might miss out on some valuable benefits that you are eligible to receive. One of these is the Child Tax Credit, which is partially refundable even if you owe no tax.
To claim the Child Tax Credit, the taxpayer must file Form 1040 (U.S. Individual Income Tax Return). Additionally, the taxpayer must attach Schedule 8812 (Child Tax Credit) to claim the credit for eligible children and other dependents.
Schedule 8812 is used to determine how much of the Child Tax Credit a taxpayer is eligible to receive.
Child Tax Credit: Policy and Poverty Impact:
Since its introduction in 1997, the Child Tax Credit has been instrumental in supporting the majority of working families.
Congressional Research Service. “The Child Tax Credit: Legislative History,” Summary page.
Over the years, it has been regularly criticized for not reaching the poorest families, many of whom are non-filers and do not submit tax returns.
During the pandemic, the expansion of the Child Tax Credit had significant effects not only on the economy but also on low and middle-income families. Emergency measures included advance payments to eligible taxpayers. Efforts were made to reach even very low-income families who typically did not file tax returns, and as a result, when it came time to send out checks, they were not easily identified by the IRS.
Well before the pandemic, successive amendments increased the amount of the Child Tax Credit and expanded eligibility criteria; at one time, the refund was limited to taxpayers with three or more children.
However, for years, the Child Tax Credit did not reach the poorest families.
In 2021, for the first time, significant increases in the credit amount and provisions for total refundability brought benefits to needy families. As stated by the Columbia University’s Center on Poverty and Social Policy, the sixth installment of the Child Tax Credit helped prevent 3.7 million children from falling into poverty in December of 2021.
As a result, monthly child poverty decreased by almost 30%.
Who Is Eligible for Child Tax Credit in 2023 Tax Year?
The full Child Tax Credit is available to individuals earning less than $200,000 and joint filers whose combined income is $400,000 or less. The credit phases out, so higher-income taxpayers may be eligible for a partial refund.
How Do I Claim Child Tax Credit?
To claim the Child Tax Credit, taxpayers utilize Form 8812, which accompanies Form 1040 during filing. Each eligible dependent must have a Social Security number, or else the credit cannot be issued. It also calculates the amount you are eligible to receive.
Internal Revenue Service. “Instructions for Schedule 8812, Child Tax Credit.”
Child Tax Credit: Who Is Eligible?
To claim the Child Tax Credit, both the taxpayer and the child must have Social Security numbers,and only one taxpayer can claim the Child Tax Credit for any one dependent child. The child must be under 17 years of age at the end of the year, not have provided more than half of their own support, and have lived with the taxpayer for at least half the year. The qualifying child can be the taxpayer’s son, daughter, stepchild, sibling, stepsibling, half-sibling, or a descendant of any of these individuals.
What Are the Income Limits for the Child Tax Credit in the 2023 Tax Year?
The full Child Tax Credit is available for individuals earning up to $200,000 and joint filers whose combined income is up to $400,000. The credit phases out, so higher-income earners may be eligible for a partial refund.
How Do I Claim Child Tax Credit?
Form 8812, filed with Form 1040, is used to claim the Child Tax Credit. Each eligible dependent must have a Social Security number, or else the credit cannot be issued. It also calculates the amount you are eligible to receive.
Internal Revenue Service. “Instructions for Schedule 8812, Child Tax Credit.