If you’re a parent in the United States, the Child Tax Credit can significantly ease your tax burden, potentially lowering your payment amount or even boosting your refund. In 2024, this credit is valued at up to $2,000 per qualifying child under 17, and this same amount will apply to the 2025 tax filings. Let’s break down what this benefit entails, the criteria you’ll need to meet, and the steps for filing it correctly.
The Child Tax Credit works directly against the taxes you owe, reducing them dollar-for-dollar. This means that if you have a qualifying child and are eligible for a $2,000 credit, you can apply that amount to reduce your tax bill.
How the Child Tax Credit works in 2024 and 2025
However, this credit isn’t refundable; in other words, it won’t add to your refund if your tax liability is zero. Still, there’s also the Additional Child Tax Credit (ACTC), which is a refundable extension of the main credit.
The ACTC can be worth up to $1,700 per child, allowing some taxpayers to receive an extra refund even if they owe little or nothing in taxes. This form of credit can be a considerable benefit to families who, after zeroing out their tax bill, may still receive part of the credit as a refund.
Eligibility requirements for the Child Tax Credit
To claim this credit, both you and your child must meet certain conditions. Here’s a rundown to help you determine if you qualify:
- Child’s age: Each child must be under 17 during the tax year to be eligible for the credit.
- Residency and legal status: Qualifying children must be U.S. citizens, U.S. nationals, or legal residents with a valid Social Security Number. This requirement is essential for eligibility.
- Family relationship: Eligible children must have a recognized familial relationship with you, such as being your biological child, stepchild, sibling, half-sibling, niece, or grandchild. This also includes descendants of these relatives as long as they meet other criteria.
- Financial support: To qualify, the child must not have paid more than half of their own living expenses during the year.
- Living arrangements: You must have lived with the child for more than half of the tax year. In special circumstances, such as in cases of divorce, the IRS provides specific guidelines on how this requirement applies.
- Income limit: This credit has income thresholds. If you file jointly (married), the credit begins to phase out when your Modified Adjusted Gross Income (MAGI) exceeds $400,000. For all other filers, the threshold is $200,000. The credit is reduced by $50 for every $1,000 over these limits.
How to take advantage of the Additional Child Tax Credit (ACTC)
If your Child Tax Credit amount exceeds your tax liability, you may be able to claim the Additional Child Tax Credit. This refundable credit, up to $1,700 per child, could result in an additional refund. Here’s an example to clarify: imagine your tax bill is $1,000, and you qualify for a $2,000 credit. By applying the regular credit, you reduce your tax bill to zero. However, you can still claim a portion of the additional credit, potentially receiving up to $1,700 as a refund.
Steps to claim the Child Tax Credit and ACTC
To claim these benefits on your tax return, follow a straightforward process. Start by listing your children as dependents on your 1040 form. Then, you’ll need to complete Schedule 8812, where you’ll calculate the exact amount of credits you’re eligible for. This schedule is essential to determine the credit’s value and must be attached to your tax return.
The IRS processes refunds that include credits like the Earned Income Tax Credit (EITC) and the ACTC toward the end of February. This timing helps avoid delays in essential refund payments to families. Additionally, the IRS offers clear, step-by-step instructions for filling out Schedule 8812, a helpful resource for taxpayers completing it for the first time.