What’s New with the Child Tax Credit? Everything You Need to Know!
Hey parents! We’ve got some exciting updates about the Child Tax Credit (CTC) that you won’t want to miss. Whether you’re a seasoned pro at tax credits or you’re just trying to figure things out, we’re here to break it all down for you in the simplest way possible. Let’s dive in!
What is the Child Tax Credit (CTC)?
The Child Tax Credit is a nonrefundable tax credit available to taxpayers with dependent children under the age of 17. It’s designed to help reduce your tax bill on a dollar-for-dollar basis. And yes, there’s even a possibility for a partial refund through the “additional child tax credit.” What a win-win!
New Changes for 2024
The Tax Relief for American Families and Workers Act of 2024 had some significant proposals but did not pass the Senate as of August 1. Here’s what you need to know about the current landscape:
- CTC Value: For 2024, the credit remains at $2,000 per qualifying dependent child if your Modified Adjusted Gross Income (MAGI) is $400,000 or below (married filing jointly) or $200,000 or below (all other filers).
- Phase Out: If your MAGI exceeds these limits, the credit is reduced by $50 for every $1,000 over the threshold.
- Refundable Amount: The refundable portion will be worth up to $1,700, up from $1,600 in 2023. Not bad!
For more details, check out the NerdWallet article.
Eligibility Requirements
- Age: The child must be under 17 at the end of the tax year.
- Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, step-sibling, or any descendant of these relationships.
- Dependent Status: You must be able to claim the child as a dependent.
- Residency: The child must have lived with you for at least half of the year.
- Financial Support: You must provide at least half of the child’s support during the year.
- Citizenship: The child must be a U.S. citizen, U.S. national or U.S. resident alien, with a valid Social Security number.
- Income: Parents or caregivers must meet specific income requirements.
State-Level Child Tax Credits
Good news! Some states offer their versions of CTC. States like California, Colorado, and New York have made the child tax credit refundable. Check out the NCSL’s overview for more information.
How to Claim the Child Tax Credit
You can claim the CTC when you file your annual tax returns. You’ll likely need to fill out Schedule 8812 (“Credits for Qualifying Children and Other Dependents”). Most tax software can guide you through the process with step-by-step questions.
If you’re still figuring out your 2023 tax return, use Form 1040 or 1040-SR for this year.
Additional Child Tax Credit
If you qualify for the CTC but can’t use it fully because of low taxes owed, you might be eligible for a partial refund through the additional child tax credit (ACTC). This requires having an earned income of at least $2,500. For more details, visit the IRS page on CTC, ACTC, and ODC.
Final Words
The Child Tax Credit can significantly lighten the load on parents. Make sure to stay updated and take full advantage of it! If you have any questions or want to share your experiences, drop a comment below. Let’s help each other out!
Mason Caldwell is a financial expert and writer who specializes in topics related to taxation, personal finance, and economic analysis. With extensive experience in the financial industry, Mason has contributed to numerous financial publications, sharing insights that help individuals and businesses make smarter financial decisions. Known for his ability to simplify complex financial topics, Mason’s articles are both informative and accessible to a wide audience. When he’s not writing, Mason enjoys hiking, reading historical novels, and exploring new technologies in finance.
