The Child Tax Credit (CTC) is a significant financial assistance program for families with children in the United States. For the 2024 tax year, there are several important changes and considerations to keep in mind.
Table of Contents
Increased Credit Amounts
- The base child tax credit will be worth $2,000 per qualifying child, with $1,700 being potentially refundable.
- The credit will be adjusted for inflation, which could result in a roughly $100 increase each year.
- For tax years 2024 and 2025, the refundable amount will grow to $1,900 and $2,000, respectively.
Eligibility Requirements
- To qualify for the refundable portion of the credit, filers must earn at least $2,500.
- In tax years 2024 and 2025, filers can use their earned income from either the current year or the prior year to meet the $2,500 requirement.
- This change is especially significant for lower-income families who might not otherwise qualify due to fluctuations in their income.
Claiming the Credit
- To claim the child tax credit, filers must file a federal income tax return (Form 1040 or 1040-SR) by April 15, 2024, or by October 15, 2024, with a tax extension.
- Filers need to fill out Schedule 8812, “Credits for Qualifying Children and Other Dependents,” which is submitted with the 1040 form.
- Most quality tax software guides filers through the process with interview questions and auto-fills the forms.
Implementation and Payments
- If the proposed legislation passes, the IRS estimates that only 10% of filers would be eligible for a slight adjustment to their refunds.
- The agency aims to recalculate and issue necessary refunds within six weeks of the bill’s passage.
- The IRS will make monthly payments of $300 for children under six and $250 for those aged six to seventeen starting July 15, 2024.
Comparison to UK Child Tax Credit
- In the UK, the child tax credit rates for the 2024 to 2025 tax year include a basic amount of up to £545 and a child element of up to £3,455 per child.
- There are additional elements for disabled and severely disabled children.
Key Dates
- The end of the 2024 tax season for most Americans is April 15, 2024.
- If unable to file by this date, filers can file for an extension or file a late return without an extension.
Who qualifies for the child tax credit?
Requirements:
To qualify for the Child Tax Credit (CTC), taxpayers must meet seven specific tests:
- 1. Age Test
The child must have been under the age of 17 at the end of the tax year. - 2. Relationship Test
The child must be your own child, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of these people (e.g., grandchild, niece, or nephew). - 3. Support Test
The child cannot have provided more than half of their own financial support during the tax year. - 4. Dependent Test
You need to declare the child as a dependent when filing your tax return:
The child must be your child (or adoptive or foster child), sibling, niece, nephew, or grandchild.
The child must be under age 19, or under age 24 and a full-time student for at least five months of the year, or permanently disabled, regardless of age.
The child needs to have resided with you for over half of the year. – The child must have provided no more than half of their own support for the year. - 5. Citizenship Test
The child must be a U.S. citizen, U.S. national, or U.S. resident alien, and must hold a valid Social Security number. - 6. Residency Test
The child must have lived with you for at least half the year (with some exceptions). - 7. Income Test
Parents or caregivers claiming the credit typically cannot exceed certain income requirements. The credit decreases gradually as their income surpasses that threshold until it eventually phases out.”
Additional Requirements
You must earn at least $2,500 to qualify for the credit, or have at least three dependents if your income is below this amount.
You must file your taxes using the guidelines posted on Schedule 8812 (Form 1040 or 1040A, Child Tax Credit page).
Consequences of an Error
Mistakes on your tax form might lead to a delay in receiving your refund or the portion allocated for the child tax credit. In some cases, the IRS could deny the entire credit, requiring repayment of any CTC amount received in error, plus interest, and potentially a penalty of up to 20% of the credit amount claimed
State Child Tax Credits
Some states, such as California, Colorado, and New York, offer their own state-level child tax credits that you may be able to claim when filing your state return.
Key Dates
For the majority of Americans, the conclusion of the 2024 tax season falls on April 15th, 2024. If unable to file by this date, filers can file for an extension or file a late return without an extension.
More information: Child Tax Credit 2024: Requirements, Who Qualifies Source- nerdwallet.com