Do you know what is the Child Tax Credit in the US? For American taxpayers with dependent children under 17 at the conclusion of the tax year, the Child Tax Credit (CTC) is an essential tax benefit. A credit of $2,000 per qualifying kid is available to qualified taxpayers for the 2023 tax year, reflected on tax returns submitted in 2024.
L&Y Tax Advisor further explains what is the Child Tax Credit in the US – Joint filers may earn up to $400,000. However, single filers must earn up to $200,000 to be eligible for the entire amount.
Income is gradually lowered if it surpasses certain limits. This benefit was temporarily raised under pandemic relief efforts to $3,600 for children under six and $3,000 for other eligible children. However, it returned to pre-2021 levels.
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How the Child Tax Credit Works?
Compared to a tax deduction, which decreases taxable income, the Child Tax Credit directly lowers the taxes due on a dollar-for-dollar basis.
To claim the credit, taxpayers must file Schedule 8812, Credits for Qualifying Children and Other Dependents, with Form 1040 and include a Social Security number for each eligible dependent.
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To qualify, the dependent child must meet the following criteria:
- Be under 17 years old at the end of the tax year.
- Be the taxpayer’s child, stepchild, foster child, sibling, half-sibling, stepsibling, or a descendant of any of these.
- Have lived with the taxpayer for more than half the year.
- Have provided no more than half of their financial support.
- Be claimed as a dependent on the taxpayer’s return.
- Not have filed a joint return unless solely to claim a tax refund.
- Be a US citizen, national, or resident alien.
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How to Claim the Child Tax Credit?
Many low-income individuals neglect to file their taxes because they believe they owe no taxes. The Additional Child Tax Credit (ACTC) can partially reimburse the Child Tax Credit. One significant benefit may be lost if you don’t file. This makes it possible for qualified taxpayers to get credit even with no outstanding taxes.
To claim the Child Tax Credit, taxpayers must complete Form 1040 (US Individual Income Tax Return) and include Schedule 8812 to determine the qualified credit amount.
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Who Is Eligible for Child Tax Credit?
The dependent kid and the taxpayer must have current Social Security numbers to be eligible for CTC. The credit may only be claimed by one taxpayer per kid. The kid must also have:
- Lived with the taxpayer for more than half of the year
- Be under 17 at year’s end
- Not have contributed more than half of their income
How Do I Claim the Child Tax Credit?
To be eligible for the Child Tax Credit, taxpayers must file Form 8812 with their Form 1040. Each eligible kid must have a Social Security number. Form 8812 also ascertains a taxpayer’s eligibility for a credit.
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The Bottom Line
Now you know what is the Child Tax Credit in the US!
Each eligible child receives a $2,000 benefit from the CTC or the 2023 tax year. Even those who owe no income tax may get up to $1,600 in 2023 and $1,700 in 2024, thanks to the partial refund provisions of ACTC, even if the CTC itself is non-refundable. Taxpayers must submit a federal income tax return and complete the required paperwork to get this tax credit.
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