The Child Tax Credit is an important credit which is utilized by many families. The the tax season currently beginning, it is important that you ensure that you check your eligibility for tax credits which can give you a reduced payment load to the IRS. Approximately 48 million Americans apply for the Child Tax Credit each year, however many are also under utilizing the credit when they could be eligible for it.
The Child Tax Credit: Up to $2,000 in savings
The Child Tax Credit is aimed at families with qualifying children to receive a significant tax break. With increased costs of living, being able to keep up with the expenses of children can be overwhelming, especially if you have more than one. This initiative is important to ensure that citizens are able to support their families through governmental programs and tax initiatives.
For the 2024/2025 tax year, if your minor dependents are eligible to allow you to receive the credit, you can claim up to $2,000 per dependent child. Up to $1,700 of this credit is refundable through the Additional Child Tax Credit. Families must note that you must first qualify for the Child Tax Credit before you can qualify for the Additional Child Tax Credit. The key difference between the two programs is that the Child Tax Credit reduces the amount of taxes you owe, while the Additional Child Tax Credit gives you money back up to $1,700 per child, provided you qualify.
Qualifying criteria to receive the Child Tax Credit
According to the IRS website, anyone with a child qualifies for the Child Tax Credit, plus the following qualifying criteria for the dependent in order for your family to be eligible to receive the Child Tax Credit and reduce your overall tax burden:
- Be under 17 at the end of the tax year.
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece, or nephew).
- Not provide more than half of his or her own support for the tax year.
- Have lived with you for more than half the tax year.
- Be claimed as a dependent on your return and not be claimed on anyone else’s.
- Be a U.S. citizen, U.S. National, or U.S. resident alien.
- Have a Social Security Number that is valid for employment and is issued before the due date of your tax return (including extensions).
Your income limits also determine if you can receive the Child Tax Credit. Your annual income cannot exceed $200,000 for individual filers, while married couples filing jointly cannot have their income exceeding $400,000 annually. Taxpayers must also note that the IRS cannot issue the Additional Child Tax Credit before mid-February. The expected payment date is March 3, 2025.
Eligibility for the Additional Child Tax Credit
If you qualify for the Child Tax Credit, you may also be eligible for the refundable Additional Child Tax Credit. This comes into play if the amount you owe in taxes is less than what the total tax break you receive through the Child Tax Credit is.
For example: if you have two qualifying dependent children, you would receive $4,000 worth of a tax break. However, if you only owed $1,000 in taxes, that means you still have $3,000 left over. This is when the Additional Child Tax Credit comes in. Each qualifying child can receive up to $1,700 in a refund through the Additional Child Tax Credit. This means, your two children qualify you to receive up to $3,400 back in a refund. This means you will receive the full $3,000 back through the Additional Child Tax Credit. However, you would not receive the additional $400 as you only had $3,000 left after tax.
According to the IRS website, you must also take note of any other additional credits you may qualify for, as well as the required documentation needed to apply for it. If you submit your return in time and correctly, you will soon have some extra funds in your pocket to do with as you please.
