If you’re a parent in the United States, the Child Tax Credit can greatly reduce your tax bill. It may even increase your tax return, helping your family financially. In 2024, the credit is worth up to $2,000 per qualifying child under the age of 17.
This benefit will be the same in 2025. Let’s take a closer look at how this benefit works, the eligibility requirements, and the steps for filing.
What is the Child Tax Credit?
The Child Tax Credit directly reduces the amount of taxes you owe. If you qualify for the full $2,000 credit, it will lower your tax bill dollar for dollar. For example, if you owe $2,000 in taxes and qualify for the credit, you could pay nothing.
How the Child Tax Credit Works in 2024 and 2025
The credit in 2024 and 2025 works the same way, but there is a catch: it is non-refundable. This means if your tax bill is zero, you won’t get any extra money from the credit. However, you may be able to get a refund through the Additional Child Tax Credit (ACTC).
Additional Child Tax Credit (ACTC)
The ACTC is a refundable extension of the Child Tax Credit. It can be worth up to $1,700 per child. Even if you owe little or no taxes, the ACTC could give you a refund. This is especially helpful for families who have a low tax bill but still need support.
Eligibility for the Child Tax Credit
To qualify for the Child Tax Credit, both you and your child must meet certain conditions. Here’s a simple list to help you determine if you’re eligible:
- Child’s Age: The child must be under 17 during the tax year.
- Residency: The child must be a U.S. citizen, U.S. national, or legal resident with a valid Social Security Number.
- Relationship: The child must be your biological child, stepchild, sibling, half-sibling, niece, grandchild, or a descendant of these relatives.
- Support: The child cannot have provided more than half of their own support during the year.
- Living Arrangement: You must have lived with the child for more than half of the year. Special rules apply in cases of divorce.
- Income Limit: If you’re married, the credit begins to reduce when your income exceeds $400,000. For other filers, the limit is $200,000. The credit decreases by $50 for every $1,000 you earn over these limits.
How to Use the Additional Child Tax Credit (ACTC)
If your tax bill is smaller than the full Child Tax Credit, you might be able to claim the ACTC. For example, if you owe $1,000 in taxes but qualify for a $2,000 credit, your tax liability will drop to zero. You could then receive a refund of up to $1,700 from the ACTC.
Steps to Claim the Child Tax Credit and ACTC
To claim the Child Tax Credit and ACTC on your tax return, follow these steps:
- List your children as dependents on the 1040 form.
- Fill out Schedule 8812, which calculates the exact amount of credit you qualify for. This form must be included with your tax return.
- The IRS handles refunds for credits like ACTC at the end of February to avoid delays.
The IRS provides detailed instructions to help you fill out Schedule 8812, especially if it’s your first time.
The Child Tax Credit can provide valuable support for families in 2024 and 2025. By reducing the taxes you owe or offering a refund through the Additional Child Tax Credit, this benefit can make a big difference for your family’s finances. Ensure you meet all the eligibility requirements and follow the necessary steps to claim your credits correctly.
What is the Child Tax Credit?
The Child Tax Credit is a tax benefit that helps reduce the amount of taxes you owe. In 2024, parents can get up to $2,000 per child under the age of 17.
How do I qualify for the Child Tax Credit?
To qualify, your child must be under 17, live with you for more than half the year, and meet certain other requirements like being a U.S. citizen or legal resident.
What is the Additional Child Tax Credit (ACTC)?
The ACTC is a refund option for parents who qualify for the Child Tax Credit but owe little or no taxes. It can provide up to $1,700 per child, even if you don’t owe taxes.
Can I claim both the Child Tax Credit and ACTC?
Yes! If your Child Tax Credit exceeds your tax bill, you can claim the Additional Child Tax Credit for a possible refund.
What if my income is over the limit for the Child Tax Credit?
If your income is above the limit (over $200,000 for single filers or $400,000 for married couples), the credit may reduce by $50 for every $1,000 over the limit.
