The Child Tax Credit is a tax benefit available to families with children under the age of 17. As a parent or guardian, you may be able to claim a tax credit of up to $2,000 per qualifying child. The child must be your daughter, son, stepchild, foster child, sister, brother, stepsister, stepbrother, or a descendant of any of them, and must have a valid Social Security number.
Adopted children also qualify, as do children placed with you for legal adoption. Children who provide over half of their own support or file a joint return do not qualify. There are also income eligibility requirements based on your adjusted gross income (AGI) to receive the maximum credit and additional benefits which we will explore more below.
How Much is The Child Tax Credit Worth?
The maximum Child Tax Credit amount is $2,000 per eligible child. If the amount of the credit is more than the taxes you owe, you may be eligible for an Additional Child Tax Credit which could increase your tax refund by up to $1,400 per child. The actual amount you can claim depends on several factors including:
- Your marital status – Married couples filing jointly will qualify for a higher credit amount than single parents or individuals.
- The number of qualifying children – The more eligible dependents you have, the higher the maximum credit.
- Your household income – The tax credit amount begins to phase out once your income surpasses $200,000 for single filers and $400,000 for married couples filing jointly. Higher-income households may still receive partial credit.
- The number of other dependents – The Child Tax Credit only applies to children under 17, but other credits like the Dependent Care Credit provide additional benefits for dependents of any age.
The Child Tax Credit is not a child care tax credit, though you may claim some child care-related expenses. It provides financial assistance based simply on the number of eligible children in your household. For many families, the credit translates into thousands per year that can be used to help cover the cost of raising children.
Use The Child Tax Credit Each Year You Qualify
The Child Tax Credit is available each year if you have a qualifying dependent and meet the income requirements. As your income or family size changes from year to year, the amount of your credit may also change. So you will need to file for a return of the Child Tax Credit on your tax annually to get the maximum benefit.
Some years you may receive the full $2,000 per child, while in other years you may only receive a partial credit amount. But either way, the Child Tax Credit provides substantial assistance to help offset the financial demands of raising children.
Coordinating With Other Tax Credits
There are a few other tax credits families may be eligible for in addition to the Child Tax Credit, including:
- The Child and Dependent Care Credit is worth up to 50% of up to $8,000 in child care costs for one or more dependents. This credit offers child tax credit benefits for many of the same dependents.
- The Earned Income Tax Credit for lower-income families is worth up to $6,660. Income limits are higher for married couples filing jointly and those with dependents.
- The American Opportunity Tax Credit provides up to $2,500 for education expenses. Though primarily for college students, families with dependents in school may benefit.
- The Dependent Care Flexible Spending Account allows you to set aside up to $5,000 in pre-tax income to pay for child care and summer camps.
You will need to determine which combination of credits provides your family with the maximum tax savings based on your income, expenses, and family makeup. The rules for each credit vary, so check with your tax advisor for help coordinating multiple benefits.
Claiming The Child Tax Credit On Your Return
To claim the Child Tax Credit, you will have to report it on your annual income tax return Form 1040 or 1040-SR. You need to calculate the amount using Form 1040, Schedule 8812. Report the required information for each qualifying child including their name, age, Social Security number, and the amount of time they spent living with you during the year.
The credit amount is then multiplied by the number of children and used to offset any taxes owed for the year. If the credit reduces your tax liability to $0, you may be eligible for the additional Child Tax Credit paid as part of your refund. Be sure to claim the Child Tax Credit for each year your children qualify to get the maximum benefit during their childhood.
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