When times get tough, a little financial help can go a long way. In the U.S., families with dependent children can benefit from the Child Tax Credit (CTC), a valuable tax credit that helps lighten the financial burden. In 2023, families may claim up to $2,000 per qualifying child under 17, with a portion of this credit, up to $1,700, being refundable. Let’s look into what this credit offers, how eligibility works, and what you need to know about the Additional Child Tax Credit (ACTC).
Child Tax Credit
The Child Tax Credit is a non-refundable credit, meaning it can reduce your tax liability but will not result in a tax refund beyond what you owe. For families with children under 17 years old, the CTC offers up to $2,000 per child, helping reduce the amount owed to the IRS.
The current refundable portion, capped at $1,700, is known as the Additional Child Tax Credit (ACTC). This means that if your tax liability is reduced to zero before fully using the CTC, you may qualify to get some money back through the ACTC. The key advantage of this credit is that it puts more money directly into families’ pockets.
Additional Child Tax Credit
For those who cannot fully use the Child Tax Credit because they owe no taxes or their tax bill is lower than the credit amount, the Additional Child Tax Credit (ACTC) may provide a partial refund. This refundable credit can be a financial lifesaver for families, especially during times of crisis.
The refundable amount for 2023 is up to $1,700, which can be a vital source of income for families who need extra financial support but don’t have a large tax bill to offset.
Income Thresholds
To claim the full $2,000 Child Tax Credit, your modified adjusted gross income must be within certain limits. For married couples filing jointly, the credit is available if your income is $400,000 or less. For all other filers (such as single or head of household), the income limit is $200,000 or less.
If your income exceeds these thresholds, the credit is reduced by $50 for every $1,000 over the limit. For instance, if a married couple earns $410,000, their credit would be reduced by $500. Once your income surpasses these limits significantly, you may become ineligible for the credit altogether.
Here’s a quick breakdown of how the credit amount reduces based on income:
| Filing Status | Income Threshold | Credit Reduction ($50 per $1,000 over) |
|---|---|---|
| Married (Filing Jointly) | $400,000 | $50 for every $1,000 over limit |
| Other Filers (Single, HOH) | $200,000 | $50 for every $1,000 over limit |
Eligibility
To qualify for the Child Tax Credit, your child must meet specific criteria, including age, relationship, and residency. These guidelines ensure that the credit is given to families who genuinely support and care for dependent children.
- Age Requirement: The child must be under 17 years old.
- Relationship: The child must be a close family member, such as a son, daughter, stepchild, sibling, step-sibling, or any legally adopted child.
- Dependency: The child must be declared as a dependent on your tax return.
- Residency: The child must live with you for at least half of the year.
- Support: You must provide more than half of the child’s financial support.
- Citizenship: The child must be a U.S. citizen or resident alien with a valid Social Security number.
ACTC Eligibility
Eligibility for the Additional Child Tax Credit follows similar guidelines as the standard Child Tax Credit but applies when the full $2,000 cannot be used to offset taxes. Here’s what to keep in mind:
- Your child must be under 17 at the end of the tax year.
- Dependent status: The child must be claimed as a dependent on your tax return and live with you for more than six months.
- No joint filing: The child cannot file a joint tax return with anyone else unless it’s only to claim a refund.
- Support requirement: You must contribute more than half of the child’s total support throughout the year.
Additionally, if a child is capable of supporting themselves or is independent for any reason, they are no longer eligible for the Child Tax Credit or ACTC.
The Child Tax Credit and the Additional Child Tax Credit can provide much-needed relief for families raising children under 17 years old. Whether it’s offsetting your tax bill or offering a partial refund, these credits can make a real difference in managing household expenses. However, it’s essential to understand the income thresholds and eligibility requirements to ensure you receive the correct credit amount.
With income limits and varying refund amounts, these credits can be tricky to navigate, but knowing the rules will help you make the most of them when tax time rolls around.
FAQs
What is the Child Tax Credit amount for 2023?
The Child Tax Credit is up to $2,000 per qualifying child.
How much is refundable with the ACTC?
The refundable portion is up to $1,700 through the Additional Child Tax Credit.
What income limits apply to the Child Tax Credit?
Married filers must earn $400,000 or less; other filers $200,000 or less.
Can I claim the credit if my income exceeds the limit?
If your income exceeds the threshold, the credit reduces by $50 for every $1,000 over.
What is the minimum age for a qualifying child?
The child must be under 17 years old by the end of the tax year.
