The information in this article is up to date for tax year 2023 (returns filed in 2024).
Have kids? If they’re under the age of 17, you may be able to claim a tax credit worth up to $2,000 per qualifying child. Currently, up to $1,600 of the credit is refundable. However, lawmakers are looking to expand the Child Tax Credit and it could put more money in your pocket. Find out what the Child Tax Credit looks like now, the proposed changes, and how to qualify. Plus, we’ll break down frequently asked questions about the 2023 Child Tax Credit.
What is the Child Tax Credit?
The Child Tax Credit (CTC) is a partially refundable tax credit for taxpayers with dependent children under age 17.
The first Child Tax Credit was introduced in 1997 as a $500 nonrefundable credit through the Taxpayer Relief Act. In 2017, the Tax Cuts and Jobs Act (TCJA) updated the eligibility requirements, increased the potential credit up to $2,000 per child, and changed the income threshold to qualify. These changes are effective from 2018-2025.
The Child Tax Credit for 2023
For tax year 2023, the maximum credit is $2,000 per child under the age of 17 for taxpayers with annual income under $200,000 (or $400,000 if filing jointly). Taxpayers with higher incomes may be eligible for a partial credit.
Who Qualifies for the Child Tax Credit 2023
There are seven key requirements to qualify for the Child Tax Credit in 2023.
- Age: Your child(ren) must be under the age of 17 by the end of 2023.
- Relationship: The child(ren) you claim must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew).
- Financial Support: The child must not provide more than half of their own financial support during the year. (I.e., You should be covering at least half of their financial support for them to qualify as a dependent).
- Residence: Your child(ren) must have lived with you for at least half the year.
- Dependent: The child(ren) must be a qualified dependent and cannot file a joint tax return except to claim a refund of withheld income tax or estimated tax paid.
- Income: Parents or caregivers claiming the full tax credit cannot have an income exceeding $200,000 ($400,000 if filing jointly). If your income exceeds that limit, you may be able to claim a partial credit.
- Citizenship: The child must be a U.S. citizen, U.S. national, or U.S. resident alien with a valid social security number.
What is the proposed Child Tax Credit expansion?
The Tax Relief for American Families and Workers Act of 2024, would increase the maximum refundable amount per child over the next three years. Currently the maximum refundable amount is $1,600. Under the new rules, it would be $1,800 for tax year 2023; $1,900 for tax year 2024; and $2,000 for tax year 2025. The IRS says that if the bill passes, they will automatically issue any additional refunds within 6 to 12 weeks. So, there’s no need to amend your return or delay filing.
Child Tax Credit FAQs
Am I Eligible for the Child Tax Credit?
To qualify for the Child Tax Credit, you must meet all seven eligibility criteria listed above. You can use the IRS Interactive Tax Assistant to check if you qualify.
Or simplify the entire tax filing process and e-file with ezTaxReturn. ezTaxReturn walks you through the process step-by-step and calculates your credit eligibility and tax liability for you.
How Do I Claim the Child Tax Credit?
You’ll claim the credit on your IRS Form 1040 and fill out the accompanying Schedule 8812 (“Credits for Qualifying Children and Other Dependents”). This is where you will calculate the credit you qualify for and how much of a refund you can claim (if applicable).
Is the Child Tax Credit Taxable?
No. The Child Tax Credit is not considered taxable income. It is a partially refundable tax credit.
Is the Child Tax Credit the Same as the Child and Dependent Care Credit?
No. They are two separate tax credits for families. You can claim both on your tax return if you qualify. The Child and Dependent Care Credit is a tax credit for families who had qualifying expenses on child care.
Will the Child Tax Credit be fully refundable for tax year 2023?
No. Only up to $1,600 of the child credit is refundable through the Additional Child Tax Credit (ACTC) for 2023.
Refundable tax credits allow you to take the full credit off your tax bill. If your tax bill amounts to less than the total credit, the remaining credit balance is refunded to you. Refundable tax credits are highly valued because they can not only reduce your tax bill to zero but put more money back in your pocket.
What Happens If I Make an Error on My Child Tax Credit Claim?
Errors on your tax return can cause delays in processing your refund or applicable credits and may result in a denial of your claim or even an IRS audit. That’s why it’s important to double check your calculations before submitting your taxes.
E-filing with a trusted tax prep solution like ezTaxReturn reduces your risk for errors and speeds up your refund. In fact, the IRS says 90% of taxpayers will receive their refund within 21 days when they file electronically.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
