NCAP has new outreach and program resources for the child tax credit (CTC). This partially refundable credit reduces your tax liability dollar-for-dollar per eligible dependent.
Families can receive monthly advance payments of their CTC or take it all at once when they file their taxes. Both options provide the exact size credit.
What is the Child Tax Credit?
A significant benefit that gives families money for each kid to help them pay to raise their children is the child tax credit. It’s essential for parents to know if they are eligible and to understand how the credit works and how it’s claimed.
The credit expansion was enacted and made it “fully refundable.” This means that families could receive their credits as cash payments even if they did not pay taxes or were not required to file a tax return. It also allowed the honor to be disbursed monthly instead of a lump sum at tax time. This change has been shown to impact families’ ability to make ends meet positively and their health and financial stability.
However, the changes are temporary and may not be reenacted in future years. If they are, it’s essential to ensure that very low-income households receive full benefits. Studies have shown that making the credit fully refundable can reduce poverty among these families, especially Black children. It is also essential to consider how the distinction might be reformed in the coming years to better align with research findings on how regular and predictable household income supports healthy child development and outcomes.
For whom is the Child Tax Credit Available?
The Child Tax Credit is available to families with qualifying children under 17. This includes biological, foster, adopted, stepchildren, and a dependent or claimable spouse. To receive the total amount, the family’s income must be under certain thresholds based on their size and type of household. The credit can also be refundable, meaning the family could receive more in return than they paid in taxes.
If you are single, filing as the head of your household, married, filing jointly, or filing separately, your income must be below the limits to qualify. There are also other limitations based on your relationship, support, dependency status, citizenship, and length of residency. In addition, the child claimed for the credit must have a Social Security number or Individual Taxpayer Identification Number (ITIN), and you must be able to claim the child as a dependent on your return.
The credit reduces the amount you owe in federal taxes and is distinct from a tax deduction, which only reduces how much of your income is subject to tax. It also does not count as income for determining your eligibility for benefits. The temporary changes to the credit that we passed as part of have now ended, and it will revert to previous payment levels.
How Much is the Child Tax Credit Worth?
The credit can be worth more per qualifying child. However, like most tax credits and deductions, the value of this credit decreases as your income rises. Your tax bracket changes with your earnings, and the credit is refundable. If you break even on your taxes or receive a refund, you can get the remaining amount as additional cash.
The plan enacted last year temporarily increased the credit value per eligible child under age six through 17. The credit also was extended to families in territories, a change aimed at supporting the needs of those families.
The credit is scheduled to return to its pre-TCJA form. Your adjusted adjusted gross income (MAGI) determines the amount you are eligible for. You cross that threshold if you file a combined return with a MAGI higher than the amount by which your prospective Child Tax Credit is lowered.
Only one person, typically the custodial parent, can claim the credit per child. In divorce cases, the noncustodial parent can sign a form with the child’s other parent stating they can claim the child’s credit. When you file your return, it will ask simple questions to determine if you are entitled to the recognition and then guide you through filling out the Form and Schedule (Credits for Qualifying Children and Other Dependents).
How Do I Claim the Child Tax Credit?
Most families are eligible for advance payments and do not need to take any additional action to receive them. However, if your family’s situation changes throughout the year — such as a child reaching an age test change or a new dependent being born or adopted – you can update those details through the IRS’s online Child Tax Credit portal once it begins accepting updates later in the summer. Otherwise, you must wait to claim your Child Tax Credit when you file next spring if you don’t want to get advance payments throughout the year.
They expanded the credit to provide millions of families with per child under six and per qualifying child ages 6 through 17. This is a fully-refundable credit that low-income families can take as a refund if it exceeds their taxes owed.
To be a “qualifying child” for the CTC, the child must meet all seven criteria: age, relationship, support, dependency status, citizenship, length of residency, and family income. A qualifying child must also have a valid Social Security number or Individual Taxpayer Identification Number and be your son, daughter, foster child, brother, sister, step-brother or step-sister, or descendent of any of those (for example, your grandchild). For more information, visit the IRS’ unique Child Tax Credit eligibility guidelines.
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