Everything You Need to Know About the Child Tax Credit

Raising children can be expensive, but the Child Tax Credit (CTC) is designed to provide financial relief to eligible families. This tax benefit helps reduce the amount of federal income tax you owe and, in some cases, even provides a refund. Understanding how it works, who qualifies, and how to claim it can ensure you maximize your tax savings.

Here’s everything you need to know about the Child Tax Credit for the current tax year.

What Is the Child Tax Credit?

The Child Tax Credit (CTC) is a federal tax benefit that helps parents and guardians offset the costs of raising children. It directly reduces your tax bill and, depending on your income, may be partially refundable, meaning you could receive money back even if you don’t owe any taxes.

The credit amount, income limits, and refundability rules vary based on recent tax law changes. Be sure to check IRS updates each year to see the most current eligibility rules.

Who Qualifies for the Child Tax Credit?

To claim the Child Tax Credit, you and your child must meet certain qualifications:

1. Age Requirement

• The child must be under age 17 at the end of the tax year.

2. Relationship to You

• The child must be your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of these (e.g., grandchild, niece, nephew).

3. Dependent Status

• The child must be claimed as a dependent on your tax return.

4. Residency Requirement

• The child must have lived with you for more than half the year (exceptions apply for military families or certain custodial arrangements).

5. Financial Support

• You must have provided more than half of the child’s financial support during the tax year.

6. Citizenship Requirement

• The child must have a valid Social Security Number (SSN) and be a U.S. citizen, U.S. national, or U.S. resident alien.

7. Income Limits

The full credit is available for families earning up to:

• $200,000 for single filers or head of household
• $400,000 for married couples filing jointly

If your income exceeds these limits, the credit amount is gradually reduced.

How Much Is the Child Tax Credit Worth?

The amount you can claim depends on tax laws for the specific year. Here’s a general breakdown:

Tax Year	Maximum Credit per Child	Refundable?	Income Phase-Out Begins At
2023	$2,000	Up to $1,600 refundable	$200,000 (single) / $400,000 (joint)
2021 (COVID-19 relief)	Up to $3,600	Fully refundable	$75,000 (single) / $150,000 (joint)

Note: The expanded credit in 2021 (up to $3,600 per child) was temporary under the American Rescue Plan and is no longer in effect.

Is the Child Tax Credit Refundable?

The Child Tax Credit is partially refundable through the Additional Child Tax Credit (ACTC) if you don’t owe enough taxes to use the full amount.

• You may receive up to $1,600 per child as a refund.
• To qualify for a refundable portion, you must have earned at least $2,500 in taxable income.

Tip: Even if you don’t owe federal income taxes, filing a tax return can still get you a refund if you qualify for the ACTC.

How to Claim the Child Tax Credit

To receive the Child Tax Credit, you must file a federal income tax return and complete the necessary forms.

Steps to Claim CTC:

1. File Form 1040 or 1040-SR – The standard tax return form for individuals.
2. Complete Schedule 8812 – This form calculates the refundable portion of the credit.
3. Include your child’s Social Security Number – Required for eligibility.
4. File your tax return on time – The deadline is April 15 unless you file for an extension.

Tip: If you use tax software (TurboTax, H&R Block, etc.), the program will automatically calculate the Child Tax Credit for you.

Other Tax Credits for Parents

In addition to the Child Tax Credit, parents may qualify for additional tax benefits:

1. Earned Income Tax Credit (EITC)

• Provides extra tax relief for low- to moderate-income families.
• Can be worth thousands depending on income and number of children.

2. Child and Dependent Care Credit

• Helps offset costs for daycare, babysitters, or after-school programs.
• Can cover up to 35% of eligible childcare expenses.

3. Adoption Tax Credit

• Provides financial relief for adoption-related expenses.

The Child Tax Credit is a powerful tool that helps families reduce their tax burden and potentially receive a refund. Understanding the eligibility rules, income limits, and how to claim it ensures you don’t miss out on valuable tax savings.

FAQs: Child Tax Credit