The 2024 tax season begins today. You may be thinking about filing your federal taxes as soon as possible. If you have children and are eligible for the child tax credit, you may want to consider whether you should wait to file your tax return. That's because Congress is working to expand the child tax credit this year. I'll explain what's happening below.
The child tax credit is partially refundable, both the current tax credit and the tax credits under consideration in the House and Senate. This means that even if you don't pay taxes, you can still get a refund on some of your deductions. The remainder is not refundable, so you can only use the tax credit toward the taxes owed. We will explain the requirements that must be met to receive the child tax credit in 2024.
Find out below if you qualify for the Child Tax Credit in 2024 and how much you can receive. For more tax tips, check out this year's filing deadlines and our picks for the best tax software.
How much is the child tax credit in 2024?
As of December 31, 2023, the per-child tax credit is capped at $2,000 per child under 17 years of age. Only a portion of that will be reimbursed this year (up to $1,600 per child).
The child tax credit expansion for the 2021 tax year was $3,600 for children 5 and under and $3,000 for children 6 to 17, but that is no longer the case. The age requirement was also temporarily extended to under 18 on December 31st, but this has also been removed.
Who is eligible for the Child Tax Credit?
To qualify for this year's tax relief, you and your family must meet the following requirements:
- Your modified adjusted gross income (MAGI) is $200,000 or less, or $400,000 if you're filing jointly.
- The child applying for credit was under 17 years oldDecember 31, 2023.
- They have a valid social security number.
- They are your legal children, stepchildren, foster children, siblings, half-brothers, half-sisters, or descendants of any of these categories (grandchildren, nieces, nephews, etc.).
- They do not contribute more than half of their own financial support in the relevant tax year.
- They live with you for more than half a year.
- You claim them as a dependent on your tax return.
- You are a U.S. citizen or resident alien.
For more information, please visit the IRS website.
If your MAGI exceeds the income limit, the amount of Child Tax Credit you receive will be reduced by $50 for every $1,000 you exceed the limit. For example, if as an individual she has her MAGI of $210,000, she can claim $1,500 for each qualifying child.
The child tax credit will be phased out completely, increasing to $240,000 for individuals and $480,000 for married couples filing jointly.
Note: If you search online for information about the child tax credit, you may find more information about the expanded 2021 tax cuts, so double check that you're viewing the most up-to-date information.
Mark Steber, chief tax information officer at Jackson Hewitt, said many government sites keep historical information alive “to recoup taxes.”
Will Congress expand the Child Tax Credit in 2024?
As part of a massive COVID-19 aid package, Congress temporarily expanded the child tax credit in 2021, helping to push child poverty to record lows. Congress did not extend the expanded credit in 2022, and the credit returned to pre-pandemic interest rates.
If approved, the new rules for the $2,000 child tax credit would be more modest and cover three tax years: 2023, 2024, and 2025. That means, if approved, you'll be able to claim the expanded deduction when you file your 2023 tax return this tax season.
As currently proposed, the new child tax credit would still be partially refundable (so you could get a refund for a portion of the credit even if you didn't pay any taxes), and the new rules would make it refundable. The maximum amount possible will increase. From $1,600 per child to $1,800 in the 2023 tax year, $1,900 in the 2024 tax year, and $2,000 in the 2025 tax year. Amounts for 2024 and 2025 are adjusted for inflation.
After excluding the refundable amount ($200 for tax year 2023), the remaining $2,000 is non-refundable, so the tax credit can only be used against taxes owed. After your tax liability reaches $0, you can't receive any additional money.
Do I have to wait to pay my taxes?
It is unclear whether Congress will pass the proposed changes. You may be wondering whether you should refrain from filing your tax return until this change is actually signed into law. “Unless I'm really, really strapped for money, I'll wait and see what happens,” Duke Alexander Moore, founder of tax service Duke Tax, told CNET.
People who receive the child tax credit typically receive their tax refund after mid-February, rather than immediately like those who didn't claim the credit. If you decide to file early and the new child tax credit rules are approved, the IRS could send you the difference this year or you could claim it when you file next year, Moore said.
Conversely, the IRS told CNET that regardless of whether you are considering a pending bill, it is recommended that you file it as soon as you are ready. Lisa Greene-Lewis, a certified public accountant and tax expert at Intuit and the creator of TurboTax, agrees, as there are other credits available to parents besides the child tax credit, such as the earned income tax credit.
Green-Lewis told CNET that the current proposal suggests that the IRS could make adjustments without requiring affected taxpayers to amend their tax returns.
Always consult a tax advisor regarding your individual tax needs.
How do I claim the Child Tax Credit?
You can claim the child tax credit by entering the qualifying child on Form 1040 and attaching a completed Schedule 8812, Credit for Qualifying Children and Other Dependents.
What if the credit is more than the tax owed?
This year's child tax credit is not fully refundable. This means that if your tax bill exceeds the amount you receive from the credit, the difference will be forfeited.
You may also be able to claim additional child tax credits. This will reimburse you up to $1,600 per child. (To find out if you qualify for the additional child tax credit, complete the IRS Form 8812 worksheet.)
If you pay for child care, you may also be eligible for the Child and Dependent Care Credit. Depending on your situation, you can claim between 20% and 35% of your childcare fees.
The maximum amount you can claim is $3,000 for each child under 13 or a dependent with a disability, and $6,000 for two or more.
To qualify for this credit, you must have an income, and your spouse or family member cannot provide care for your child.
Other federal income tax credits available to families include the adoption credit, education credit, and earned income tax credit.
Is there a state child tax credit?
More than a dozen states are part of the family: California, Colorado, Idaho, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oklahoma, Oregon, Utah, and Vermont. It is said that there is some form of tax credit that will benefit the public. He attended the National Conference of State Legislatures. Many others are also considering implementing tax cuts.
Requirements and benefits vary, so check your state tax portal for more information.