The Child Tax Credit (CTC) is a valuable financial benefit designed to help families with children offset the costs of raising kids. Whether you’re a new parent or have multiple children, understanding the CTC can provide significant savings on your tax bill. This post explains what you need to know about the credit.
What is the Child Tax Credit?
The CTC is a tax benefit that allows eligible families to receive a credit against their federal income tax. This credit helps to reduce the amount of tax owed and can even result in a refund if the credit exceeds the tax liability.
Who Qualifies for the Child Tax Credit?
To qualify for the CTC, the child generally must:
- Be under the age of 17
- Be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, a grandchild, niece, or nephew)
- Provide no more than half of their financial support
- Have lived with you for more than half the year
- Be properly claimed as a dependent
- Not file a joint tax return with their spouse. Exception: They can file a joint return to claim a refund of withheld income tax or estimated taxes paid.
- Have been a US citizen, US national, or US resident alien
How much is the CTC?
For 2024, eligible families can claim up to $2,000 per qualifying child. Also, up to $1,700 of this amount may be refundable (the Additional Child Tax Credit). This means if the CTC is higher than your tax, you could receive up to $1,700 as a refund.
Income limits
The CTC begins to phase out and is unavailable at certain income levels. The credit is reduced for single filers with an adjusted gross income (AGI) above $200,000 and married couples filing jointly with an AGI above $400,000. Additionally, single filers and married filing jointly filers with AGI of above $240,000 and $440,000, respectively, cannot claim the credit.
How to Claim the CTC
To claim the CTC, you must file a federal income tax return, even if you do not owe any tax. Use Form 1040 or 1040-SR to report your income and claim the credit.
The Importance of the Child Tax Credit
The CTC is a significant financial benefit for families, providing much-needed support as you raise your children. Above all, the credit can maximize your tax savings. If you have questions or need personalized advice, consider reaching out to a tax professional to ensure you’re getting the full benefit of this valuable credit.
