With tax season starting Monday, you may be thinking about filing your taxes early. 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 lawmakers are working to expand the child tax credit. I'll explain what's happening below.
The child tax credit (currently and currently moving through Congress) is partially refundable. This means that even if you don't pay taxes, you can still get a refund on some of your deductions. The tax credit can only be used against the taxes owed, as the remainder is not refundable. We will explain the requirements that must be met to receive the child tax credit in 2024.
Find out below if you're eligible for the Child Tax Credit in 2024 and how much you can receive.For more tax tips, see here Which divorced parent can claim the child tax credit? and all Tax deductions you can receive from home.
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 years old 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 cover three tax years: 2023, 2024, and 2025. That means you can claim the expanded deduction this tax season when you file your 2023 tax return.
As currently proposed, the new child tax credit would still be partially refundable (meaning you could get a refund for a portion of the credit even if you didn't pay taxes), and the new rules would require a refund The maximum amount possible will increase. The amount per child ranges from $1,600 per child to $1,800 per child in the 2023 tax year, $1,900 in the 2024 tax year, and $2,000 per child in the 2025 tax year. However, the amounts for 2024 and 2025 are adjusted for inflation.
After excluding the refundable amount ($200 for tax year 2023), the remaining $2,000 will be non-refundable. In other words, tax credits 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?
No one knows whether the proposed changes will become law. And you may be wondering whether you should hold off on filing your tax return until the change is actually approved by Congress and 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 your qualifying child on Form 1040 and attaching your 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.
You must have an income to qualify for this credit, and child care cannot be provided by a spouse or other family member.
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.