The Child Tax Credit (CTC) in the United States is a significant financial relief for families with dependents under the age of 17.
In 2024, eligible families can claim up to $2,000 per child, and a portion of this amount—up to $1,700—is refundable as the Additional Child Tax Credit (ACTC).
Here’s how to understand the benefit, who qualifies, and how you can maximize refunds from the child tax credit.
Understanding the Child Tax Credit
The Child Tax Credit is a non-refundable credit, meaning it reduces your tax liability but won’t result in a refund if the credit exceeds the taxes you owe. The credit allows families to claim up to $2,000 per qualifying child, helping to ease the financial burden of raising children.
What Is the Additional Child Tax Credit?
The Additional Child Tax Credit (ACTC) is a portion of the CTC that is refundable. If your tax liability is less than the available CTC (for example, if you owe little or no tax), you can still claim a refund of up to $1,700.
This can provide essential financial relief to families during difficult times, as it ensures they receive money even if they don’t owe taxes.
How to Qualify for the Child Tax Credit
To claim the Child Tax Credit, certain eligibility criteria must be met:
Key Requirements:
- Child’s Age: The child must be under 17 years old at the end of the tax year.
- Relationship: The child can be your biological child, stepchild, adopted child, sibling, step-sibling, or a descendant of any of these individuals (such as a grandchild or niece/nephew).
- Dependents: The child must be claimed as a dependent on your tax return.
- Living Arrangements: The child must have lived with you for at least half the year.
- Support: You must have provided at least half of the child’s financial support throughout the year.
- Citizenship: The child must be a U.S. citizen, U.S. national, or resident alien, and they must have a valid Social Security number.
Income Thresholds for Child Tax Credit
Your income plays a critical role in determining how much of the CTC you can claim:
- Married couples filing jointly can claim the full $2,000 per child if their modified adjusted gross income (MAGI) is $400,000 or less.
- Single filers, heads of household, and married individuals filing separately can claim the full amount if their MAGI is $200,000 or less.
Credit Reductions:
If your income exceeds these limits, the CTC will decrease by $50 for every $1,000 over the threshold. For example, if a married couple’s income exceeds $400,000, their credit would reduce accordingly.
Claiming the Additional Child Tax Credit (ACTC)
If you don’t owe enough taxes to fully utilize the non-refundable portion of the CTC, you may qualify for the ACTC, which allows you to receive up to $1,700 as a refund. This portion of the credit ensures that even families with low tax liabilities still benefit from the CTC.
Key Steps to Claim:
- File Your Taxes: Complete your federal income tax return and include all dependents who meet the eligibility criteria.
- Form 8812: Use IRS Form 8812 (Additional Child Tax Credit) to determine whether you qualify for the refundable portion.
- Receive a Refund: If you qualify, the IRS will issue a refund for up to $1,700 per child, depending on your tax liability and income.
How Refunds Are Calculated
The refundable portion of the credit is calculated based on a formula that takes into account earned income. Specifically, you can claim 15% of your income over $2,500, up to the maximum refundable amount of $1,700.
For example:
- If your earned income is $10,000, you would subtract $2,500 from your income, resulting in $7,500.
- Then, multiply $7,500 by 15% to determine the amount of ACTC, which in this case would be $1,125.
How to Maximize the Child Tax Credit Refund
Key Strategies:
- Ensure Proper Documentation: Make sure to claim all eligible children and dependents, providing correct Social Security numbers and necessary documents.
- File Early: Filing your tax return early ensures that you receive your refund sooner.
- Double-Check Eligibility: Verify that your child meets all requirements for age, residency, and relationship status.
- Check Income Levels: If your income is near the threshold, consider how deductions or contributions to retirement plans could lower your adjusted gross income and increase the amount of credit you receive.
The Child Tax Credit and its refundable portion—the Additional Child Tax Credit—offer much-needed financial support to families with dependents under the age of 17.
The maximum refundable amount of $1,700 can provide a significant boost to families, even if they owe little or no tax.
By understanding the eligibility criteria and income thresholds, you can maximize your benefits and receive the financial help your family deserves.
FAQs
Who is eligible for the $1,700 refundable portion of the Child Tax Credit?
Families with children under 17 who owe little or no tax may qualify for the Additional Child Tax Credit of up to $1,700.
How much is the Child Tax Credit in 2024?
The Child Tax Credit is up to $2,000 per qualifying child, with $1,700 refundable as the Additional Child Tax Credit.
What happens if I don’t owe enough taxes to claim the full Child Tax Credit?
If you don’t owe enough taxes, you may still qualify for the Additional Child Tax Credit, which provides up to $1,700 in refunds.
Does the Child Tax Credit get reduced if my income is high?
Yes, the credit decreases by $50 for every $1,000 over the income threshold of $400,000 for married couples or $200,000 for single filers.
How do I claim the Additional Child Tax Credit?
You must file your tax return and use Form 8812 to claim the Additional Child Tax Credit if eligible.
