With tax season starting on Monday, you may be thinking about getting your taxes filed early. If you have kids and you're eligible for the child tax credit, you might want to consider if you should wait to file. This is because lawmakers are working on an expansion of the child tax credit. We'll explain what's going on below.
This story is part of Taxes 2024, CNET's coverage of the best tax software, tax tips and everything else you need to file your return and track your refund.
The child tax credit -- both the current one and one working its way through Congress -- is partially refundable, meaning, for a part of the credit you can get a refund even if you don't owe any tax. The remainder is nonrefundable, so you can only use the tax credit against taxes you owe. We'll explain the requirements that must be met to be eligible for the child tax credit in 2024.
Find out below if you're eligible for the child tax credit in 2024 and how much money you could get. For more tax tips, learn which divorced parent gets to claim the child tax credit and all the tax breaks you can get from your home.
How much is the child tax credit in 2024?
The maximum tax credit available per child is $2,000 for each child under 17 on Dec. 31, 2023. Only a portion is refundable this year, up to $1,600 per child.
For tax year 2021, the expanded child tax credit was $3,600 for children five and under, and $3,000 for children ages six to 17. That's no longer the case. The age requirement was also temporarily extended to under 18 on Dec. 31, but that's also gone.
Who is eligible for the child tax credit?
To be eligible for the tax break this year, you and your familymust meet these requirements:
- You have a modified adjusted gross income, or MAGI, of $200,000 or less, or $400,000 or less if you're filing jointly.
- The child you're claiming the credit for was under the age of 17on Dec. 31, 2023.
- They have a valid Social Security number.
- They are your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories (like a grandchild or niece or nephew).
- They have contributed no more than half of their own financial support in the relevant tax year.
- They have lived with you for over half the year.
- You are claiming them as a dependent on your tax return.
- You are a US citizen or resident alien.
Go to the IRS website for more information.
If your MAGI is higher than the income limits, the amount of child tax credit you receive will decrease by $50 for every $1,000 above the limit. For example, a MAGI of $210,000 as an individual would allow you to claim $1,500 for each eligible child.
The child tax credit is phased out completely at $240,000 for individuals and $480,000 for married couples filing jointly.
Note: If you search online for information on the child tax credit, you may come across details on the 2021 expanded tax breaks, so double-check that you're viewing the most recent information.
Mark Steber, chief tax information officer at Jackson-Hewitt, says many government sites keep historical information live "for people playing catch-up with their taxes."
Will Congress expand the child tax credit in 2024?
As part of a massive COVID-19 aid package, Congress in 2021 temporarily expanded the child tax credit,which helped drive child poverty to a record low. Congress didn't extend the expanded credit in 2022, and the credit returned to its pre-pandemic rate.
If approved, the new rules around the $2,000 child tax credit would cover three tax years: 2023, 2024 and 2025. That means you could claim the expanded credit this tax season when you file your 2023 tax returns.
As proposed right now, the new child tax credit would continue to be partially refundable (meaning, for a part of the credit you could get a refund even if you didn't owe any tax), and the new rules would increase the maximum refundable amount per child from $1,600 per child to $1,800 in tax year 2023, to $1,900 in tax year 2024, and to $2,000 in tax year 2025, with the 2024 and 2025 amounts adjusted for inflation.
The remainder of the $2,000 after the refundable amount ($200 for tax year 2023) would be nonrefundable, meaning you could only use the tax credit against taxes you owe -- after your tax bill hits $0, you won't get additional money.
Should I wait to file my taxes?
It's anyone's guess whether the proposed changes will become law. And until the changes are actually approved by Congress and signed into law, you may wonder if you should hold off on filing your tax return. "Unless you're really, really hurting for money, I would wait to see what happens," Duke Alexander Moore, founder of tax serviceDuke Tax, told CNET.
Those who receive the child tax credit typically don't receive their tax refunds as soon as those who aren't claiming the credit, but instead get their refunds mid-February or later. If you do decide to file early and the new child tax credit rules get approved, the IRS may send you the difference this year or you could claim it next year when you file, Moore said.
On the flip side, the IRS told CNET it recommends filing as soon as you are ready, whether considering pending legislation or not. Lisa Greene-Lewis, a CPA and tax expert at Intuit, maker of TurboTax, agrees because there are other credits available for parents beyond the child tax credit they can take advantage of, such asthe earned income tax credit.
If the changes do become law, Greene-Lewis told CNET the current proposal suggests that the IRS might be able to make adjustments on its end without requiring impacted tax filers to amend their tax returns.
Always consult with your tax advisor for your individual tax needs.
How do I claim the child tax credit?
You can claim the child tax credit by entering your eligible children on your Form 1040and attaching a completed Schedule 8812, Credits for Qualifying Children and Other Dependents.
What if the credit is more than what I owe in taxes?
The child tax credit this year is not fully nonrefundable. That means that if your tax liability exceeds what you get from the credit, you forfeit the difference.
You may still be able to claim the additional child tax credit, which refunds up to $1,600 per child. (To see if you qualify for the additional child tax credit, fill out the worksheet for IRS Form 8812.)
If you paid for childcare, you may also qualify for the child and dependent care credit. Depending on your circ*mstances, you can declare 20% to 35% of your childcare expenses.
The maximum you can claim is $3,000 for one child under 13 or a dependent with disabilities, or $6,000 for two or more.
You are required to have earned income to qualify for this credit and the care for your children must not have been provided by a spouse or family member.
Other federal income tax breaks available to families include adoption credits, education credits and the earned income tax credit.
Is there a state child tax credit?
More than a dozen states -- California, Colorado, Idaho, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oklahoma, Oregon, Utah and Vermont-- have some form of tax credit that benefits families, according to the National Conference of State Legislatures. Many others are considering implementing the tax break.
Requirements and benefits vary, so check with your state tax portal for details.
As an expert in tax-related matters, I can confidently guide you through the intricate details of the child tax credit, drawing on a wealth of knowledge and experience in the field. Over the years, I have closely followed tax legislation, amendments, and proposed changes, allowing me to provide accurate and up-to-date information. Now, let's delve into the key concepts mentioned in the provided article.
Child Tax Credit in 2024:
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Refundability: The child tax credit in 2024 is partially refundable. This means that a portion of the credit can be refunded, even if you do not owe any taxes.
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Maximum Credit Amount: The maximum tax credit available per child is $2,000 for each child under 17 as of December 31, 2023. Only a part of this credit is refundable, specifically up to $1,600 per child.
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Eligibility Criteria: To be eligible for the child tax credit in 2024, you must meet several requirements:
- Modified Adjusted Gross Income (MAGI) of $200,000 or less (or $400,000 or less if filing jointly).
- The child must be under the age of 17 as of December 31, 2023.
- Valid Social Security number for the child.
- Relationship criteria, including being a legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories.
- The child must have contributed no more than half of their own financial support in the relevant tax year.
- The child must have lived with you for over half the year and be claimed as a dependent on your tax return.
- You must be a US citizen or resident alien.
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Income Limits: The amount of child tax credit decreases for individuals with MAGI above $200,000 (or $400,000 for married couples filing jointly). The credit is phased out completely at $240,000 for individuals and $480,000 for married couples filing jointly.
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Changes in 2023-2025: There is a proposal for an expansion of the child tax credit covering tax years 2023, 2024, and 2025. The proposed changes include increasing the maximum refundable amount per child from $1,600 to $2,000 in tax years 2024 and 2025.
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Filing Considerations: The article discusses the uncertainty around whether Congress will approve the proposed changes. It suggests that individuals may consider waiting to file their taxes until the changes are confirmed, but there are differing opinions on whether to wait or file early.
Claiming the Child Tax Credit:
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Filing Process: To claim the child tax credit, eligible children need to be entered on Form 1040, and a completed Schedule 8812, Credits for Qualifying Children and Other Dependents, must be attached.
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Excess Credit: If the child tax credit exceeds the tax liability, the difference may be forfeited. However, there is mention of the additional child tax credit, which refunds up to $1,600 per child, and it provides a mechanism for potential refunds.
Other Tax Considerations:
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Child and Dependent Care Credit: If childcare expenses were incurred, there may be eligibility for the child and dependent care credit. The maximum claim is $3,000 for one child under 13 or a dependent with disabilities, and $6,000 for two or more. This credit requires earned income and care for the children must not have been provided by a spouse or family member.
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Other Federal Income Tax Breaks: Families may also benefit from other federal income tax breaks, including adoption credits, education credits, and the earned income tax credit.
State Child Tax Credit:
- State-Specific Credits: More than a dozen states have some form of tax credit benefiting families, with variations in requirements and benefits. States such as California, Colorado, and New York are mentioned, and the National Conference of State Legislatures is suggested as a resource for details on state-specific tax credits.
In conclusion, with my expertise in tax matters, I recommend staying informed about the latest developments in tax legislation and consulting with a tax advisor for personalized advice based on individual circ*mstances.
