Child Tax Credit 2024 Guide - Understanding Eligibility, Value, and Claiming Process

Imagine the relief of receiving financial support for the costs of raising your children. Discover the ins and outs of the Child Tax Credit 2024, ensuring your family gets the most out of this valuable tax benefit.

As we approach tax season, understanding the Child Tax Credit 2024 (CTC) is crucial for families looking to maximize their returns and ease the financial burden of raising children. This article will provide a comprehensive overview of the CTC, including its value, eligibility requirements, and the claiming process.

Child Tax Credit 2024 Guide:

What is the Child Tax Credit?

The Child Tax Credit (CTC) is a tax benefit designed to help families offset the financial costs associated with raising children. This credit reduces a family’s tax liability, potentially leading to a larger refund or a lower tax bill. The CTC is worth up to $2,000 per qualifying child under the age of 17, with up to $1,600 being refundable. To qualify for this credit, the child must be a U.S. citizen, U.S. national, or a U.S. resident alien with a valid Social Security Number. The child must also meet relationship, residency, and support tests, as well as pass the dependency test. The credit begins to phase out for taxpayers with adjusted gross incomes exceeding $200,000 ($400,000 for married filing jointly). The CTC is not indexed for inflation, except for the refundable portion, which will increase annually until it becomes equal to the full value of the credit in 2030.

The Child Tax Credit has a significant impact on the economic well-being of low-income families with children. If the official estimate of poverty counted the Child Tax Credit 2024 as income, including the refundable portion, millions of people, including children, would be lifted above the federal poverty line. The CTC reduces the severity of poverty for an additional millions of people, including children. The American Rescue Plan Act (ARPA) increased the CTC for tax year 2021, allowing tax filers to claim up to $3,600 per child under age 6 and up to $3,000 per child ages 6 to 17, with no cap on the total credit amount for filers with multiple children. The credit was fully refundable, and low-income families could qualify for the maximum credit regardless of how little they owed in taxes.

How Much is the Child Tax Credit in 2024?

The Child Tax Credit has undergone significant changes over the years, particularly with the American Rescue Plan Act in 2021. Here are some key points based on the provided sources:

2021 Changes: The Child Tax Credit was raised to $3,600 per child for qualifying children under 6 years old, and the entire credit became fully refundable, allowing eligible families to receive it as a refund even if they don’t owe federal income tax1 1 2.
2024 Updates: For the 2024 tax year, the Child Tax Credit 2024 remains at up to $2,000 per child, with a refundable portion of $1,700. Families can receive an additional $100 per qualifying child back as a tax refund22.
Eligibility Criteria: To qualify for the Child Tax Credit, children must be under 18 years old at the end of the year, meet relationship criteria, not provide more than half of their financial support, live with the claimant for more than half the year, have a valid Social Security number, and be a U.S. citizen, U.S. national, or U.S. resident alien3 4.
Income Limits: The credit phases out for higher-income families, with the phaseout beginning at $200,000 in income for single filers and $400,000 for married couples filing jointly1 4.
Future Changes: The Child Tax Credit is set to increase with inflation in 2024 and 2025, with predictions that it could reach $2,100 by 2025. The credit is expected to become fully refundable in 2025, benefiting families who do not owe federal income taxes3 4.

These changes reflect efforts to provide more support to families through the Child Tax Credit, making it more accessible and beneficial for eligible households.

Requirements: Who Qualifies for the Child Tax Credit?

Eligibility for the Child Tax Credit 2024 (CTC) is determined by several factors:

Age: The child must be under a certain age, typically 17 years old.
Relationship: The child must be your son, daughter, stepchild, foster child, sibling, or a descendant of any of these individuals.
Support: The child must not have provided more than half of their own support during the tax year.
Dependent Status: The child must be claimed as a dependent on your tax return.
Residency: The child must have lived with you for more than half of the tax year.
Income: There are income thresholds that may phase out the credit at higher income levels.

The Child Tax Credit has undergone significant changes in recent years, with the American Rescue Plan Act (ARPA) temporarily increasing the credit to $3,600 for children under 6 and $3,000 for children ages 6 to 17. However, these changes have since expired, and the credit has reverted to its pre-ARPA form. The credit remains worth up to $2,000 per qualifying child under the age of 17, with up to $1,600 being refundable. The ARPA also made the credit fully refundable, allowing eligible families to receive it as a refund even if they don’t owe federal income tax. However, this change has also expired, and the credit is once again partially refundable.

How to Claim the Child Tax Credit in 2024

To claim the Child Tax Credit 2024 (CTC), you’ll need to fill out the appropriate sections of your federal tax return and provide necessary documentation, such as your child’s Social Security number. The maximum tax credit available per child is $2,000 for each child under 17 on Dec. 31, 2023. Only a portion is refundable this year, up to $1,600 per child.To be eligible for the tax break in 2024, you and your family must meet the following requirements:

Your modified adjusted gross income (MAGI) must be $200,000 or less, or $400,000 or less if you’re filing jointly.
The child you’re claiming the credit for must be under the age of 17 on Dec. 31, 2023.
The child must have a valid Social Security number.
The child must be your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories (like a grandchild or niece or nephew).
The child must have contributed no more than half of their own financial support in the relevant tax year.
The child must have lived with you for over half the year.
You must be claiming them as a dependent on your tax return.
You must be a US citizen or resident alien.

If your MAGI is higher than the income limits, the amount of child tax credit you receive will decrease by $50 for every $1,000 above the limit. The child tax credit 2024 is phased out completely at $240,000 for individuals and $480,000 for married couples filing jointly.If Congress approves the new rules around the $2,000 child tax credit, it would cover three tax years: 2023, 2024, and 2025. That means if it’s approved, you could claim the expanded credit this tax season when you file your 2023 tax returns. The new rules would increase the maximum to $1,900 in tax year 2024 and to $2,000 in tax year 2025, with the 2024 and 2025 amounts adjusted for inflation.Under the proposed changes, the parent could receive $1,575 per child because of the tweak to add the family’s number of children to the calculation. In effect, the parent’s CTC would double to $3,150 for each tax year.If the new tax deal is passed by the Senate, the CTC amount will remain at $2,000 per child. But a third tweak to the credit could mean that more families will get more money back in their tax refund. That’s due to changes to the partially refundable nature of the CTC, which provides up to $1,600 back in your annual tax refund if you don’t owe taxes or you are getting a refund. Under the proposed bill, the maximum refundable amount per child would rise to $1,800 in 2023, $1,900 in 2024 and $2,000 in 2025.Millions of families would benefit from an annual adjustment for inflation in 2024 and 2025. For instance, if inflation is 5% for one of those tax years, the CTC would be adjusted upwards by $100.

Additional Child Tax Credit

The Additional Child Tax Credit 2024 (ACTC) is a refundable credit for families who owe less in taxes than their eligible CTC amount. This means you could receive a refund even if you don’t owe any tax.

Should I Wait to File My Tax Return or File Now?

The Child Tax Credit 2024 (CTC) is a partially refundable tax credit that provides up to $2,000 per child under 17 years old on Dec. 31, 2023, with a refundable portion of up to $1,600 per child1 4. The CTC is available to taxpayers with a modified adjusted gross income (MAGI) of $200,000 or less, or $400,000 or less if filing jointly1 4. The child being claimed for the credit must be a U.S. citizen, U.S. national, or U.S. resident alien with a valid Social Security number, and must be your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories1 4. The child must have contributed no more than half of their own financial support in the relevant tax year and must have lived with you for over half the year1 4.

If Congress approves the new rules around the $2,000 child tax credit, it would cover three tax years: 2023, 2024, and 2025, with the 2024 and 2025 amounts adjusted for inflation1. The new rules would increase the maximum to $1,900 in tax year 2024 and to $2,000 in tax year 20251.

The IRS began accepting 2023 tax returns on January 29, 2024, and encourages taxpayers to file as soon as possible to avoid missing key documents, such as Form 1099-K, which reports income for third-party payment networks like Venmo or PayPal 2. The IRS cannot issue refunds involving the additional child tax credit (and the earned income tax credit) before mid-February due to fraud prevention measures2.

If you haven’t received your child tax credit refund yet and you’re claiming the credit, you should be able to see your projected deposit date by checking the IRS’ Where’s My Refund tool2. The refundable portion of the CTC is $1,600 per child for tax year 2023, and the IRS expects to issue most child tax credit and earned income tax credit refunds by Feb. 27 for taxpayers who have filed and chose direct deposit2.

In summary, taxpayers should file their tax returns as soon as possible to avoid missing key documents and to ensure that they receive their child tax credit 2024 refund in a timely manner. If Congress approves the new rules around the $2,000 child tax credit, it would cover three tax years: 2023, 2024, and 2025, with the 2024 and 2025 amounts adjusted for inflation1.

How Do I Claim the Child Tax Credit?

To claim the Child Tax Credit 2024 (CTC), you need to complete the Child Tax Credit and Credit for Other Dependents Worksheet and attach it to your tax return. It is crucial to ensure that you meet all the eligibility criteria before claiming the credit5. The CTC provides up to $2,000 per child under 17 years old on Dec. 31, 2023, with a refundable portion of up to $1,600 per child1 3. To be eligible for the tax break, you must have a modified adjusted gross income (MAGI) of $200,000 or less, or $400,000 or less if filing jointly, and the child you’re claiming for must meet specific criteria, such as having a valid Social Security number and living with you for over half the year3. It’s important to file your taxes to receive the full Child Tax Credit, as the credit amount was increased for 2021, making it fully refundable and expanding its scope to include 17-year-olds1 3.

What if the Credit is More Than What I Owe in Taxes?

If the Child Tax Credit (CTC) exceeds the amount of taxes owed, taxpayers may qualify for the Additional Child Tax Credit (ACTC), which can result in a refund. The ACTC is a refundable portion of the CTC that allows up to $1,600 per child to be refunded when filing taxes. To be eligible for the ACTC, individuals must meet specific criteria, including reporting at least $2,500 in earned income, having a qualifying child under 17 years old, meeting relationship and support requirements, and ensuring the child has a valid Social Security number. This credit is designed to provide financial support to families who may not fully benefit from the CTC due to low tax liability.Claiming the ACTC involves meeting the income and eligibility criteria, including having earned income above $2,500 or having three or more qualifying dependents. The credit amount is calculated based on earned income exceeding $2,500, multiplied by 15%, with a maximum refund of $1,600 per qualifying dependent. The ACTC is part of the expanded Child Tax Credit introduced under the American Rescue Plan, offering advance payments to eligible families to provide financial assistance promptly. This credit serves as a valuable resource for families, ensuring they receive the necessary support for raising children, especially during challenging times like the COVID-19 pandemic.

Is There a State Child Tax Credit?

Some states offer their own version of the Child Tax Credit, which may provide additional benefits for families. These state-level credits can vary in terms of eligibility and amount, so it’s essential to check with your state’s tax authority for more information.For instance, California, Colorado, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Vermont offer fully refundable Child Tax Credits, while Idaho, Oklahoma, and Utah provide nonrefundable credits. These state-level credits are designed to support families and reduce child poverty, often providing additional benefits beyond the federal Child Tax Credit.In 2024, the federal Child Tax Credit is $2,000 per qualifying child, with up to $1,700 potentially refundable through the Additional Child Tax Credit. To qualify for the federal Child Tax Credit, taxpayers must pass several tests related to age, relationship, dependent status, residency, financial support, citizenship, and income.The Child Tax Credit is an essential tool for lowering child poverty and providing crucial support to families raising children. By checking with your state’s tax authority, you can learn more about the potential benefits available to you and your family through state-level Child Tax Credits.

Conclusion

This guide aims to demystify the Child Tax Credit 2024, providing families with the knowledge they need to navigate this aspect of their taxes confidently. Remember, tax laws can change, so it’s important to stay informed and consult with a tax professional if you have specific questions about your situation. By understanding and utilizing the CTC, you can ensure that you’re taking full advantage of the tax benefits available to your family.

You can also read our recent blog about: Tax Saving Strategies A Comprehensive Guide for 2024