The Child Tax Credit has always been one of the major financial reliefs to American families, intending to balance the expenses one incurs while raising children. As such, it becomes very important, as we head into the 2024 tax year, to understand what the current architecture of the CTC is, who qualifies, and any impending legislation that could shape the future of the credit.
Child Tax Credit
The Child Tax Credit is a federal income tax credit to assist families with dependent children under the age of 17. For tax year 2024, up to $2,000 per qualifying child is allowable under this credit. It starts to phase out for single filers at $200,000 of modified adjusted gross income and $400,000 for joint filers. The credit is reduced by $50 for each $1,000 that the modified adjusted gross income (MAGI) exceeds the threshold amount.
Besides, the CTC also has a refundable component under Additional Child Tax Credit. For 2024, it could also refund up to $1,700 for each child. It means a family could get a refund even when one’s tax liability is brought down to zero due to this credit balance that, of course, also has the refundable limit.
Child Tax Credit 2025
The IRS recently announced the child tax credit amounts for the 2025 tax year, which will apply to taxes filed in April 2026. For 2025, the maximum credit limit remains $2,000, with a maximum refundable portion of $1,700.
The child tax credit income thresholds will also remain the same at $400,000 for those married filing jointly and $200,000 for all other filers.
Eligibility criteria of child tax credit
The following are the requirements to be satisfied for availing the CTC:
- Age: The child should be below the age of 17 by the end of the tax year.
- Relationship: He/she should be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or any of the descendant siblings like a grandchild, niece, or nephew.
- Dependent Status: The child should be claimed as dependent on your tax return.
- Residency: The child must have lived with you for more than half of the tax year.
- Support: The child must not have filed a joint return for the year and must not have paid more than half of their own financial support during the year.
- Citizenship: The child must be a US citizen, US national, or US resident alien and have a valid Social Security number.
- Income: Your MAGI must be below the phase-out limits noted above to get the full credit.
Additional child tax credit
The ACTC provides a refundable credit for those families not paying enough in taxes to take the full CTC. For 2024, you must have more than $2,500 of earned income to claim the ACTC. This refundable amount is based upon 15% of your earned income above the threshold, but is limited to $1,700 per child.
Additional child tax credit rules
- You must either have an earned income of at least $2,500 or have three or more qualifying dependents. Earned income typically means money from jobs or self-employment. It does not include money from passive sources such as dividends, pensions, welfare or unemployment.
- You or your partner (if married filing jointly) cannot exclude foreign-earned income from your taxes by filing Form 2555 or Form 2555-EZ.
How to claim the child tax credit
To claim your CTC, follow these steps:
- File Your Tax Return
- Use Form 1040 and attach Schedule 8812, “Credits for Qualifying Children and Other Dependents” to claim the credit. This schedule is used to calculate your credit amount and the portion that may be refundable.
- Ensure Accuracy
- Double-check your child’s SSN and other eligibility details.
- Submit Electronically
- File electronically via IRS e-file to speed up processing and avoid delays.
- Track Your Refund
- Refunds for the refundable portion will be issued via direct deposit or check.
Possible legislative changes coming
Recent legislation has kept the expansion of the Child Tax Credit in the spotlight. The Tax Relief for American Families and Workers Act, filed in the first part of this year, increases the maximum credit by the rate of inflation in order to make the benefits better for low-income working families. More precisely, the bill would raise the maximum refundable credit per child from $1,700 to $1,900 for the 2024 tax year.
While it has bipartisan support, there are doubts about its passing prospects. Proponents of the bill argue that only a fully funded CTC could succeed in easing the pain in the wallet for working families; opponents question how such action would affect the federal budget and the effectiveness in handling the issue of child poverty.
State child tax credits
Apart from the federal CTC, most states offer their child tax credit. For example, both California and New York provide such credits at the state level to provide further relief for family child care expenses. Since these are subjected to varied conditions and credit amount value per state, the best thing would be to look up your state’s taxing authority.
