Essential Guide to Child Tax Benefits and Credits
Learn everything about the Child Tax Credit (CTC) for 2023, including eligibility, claim process, and additional benefits. This guide explains how families can maximize their tax benefits, understand qualifications, and explore state-level credits. It also covers related credits like the Additional Child Tax Credit and other dependent benefits, helping parents reduce childcare expenses and support their children's well-being efficiently.
Understanding Child Tax Credits and Benefits
Tax responsibilities are part of every citizen’s duties. Recognizing that such payments can be challenging for families with children, the government launched the Child Tax Credit (CTC) in 1997. Over the years, this initiative has provided substantial assistance to parents, supporting childcare and combating child poverty nationwide. For the 2023 tax season (filing in 2024), the CTC amount remains at $2,000 per eligible child.
How is the CTC applied?
As the name indicates, the CTC is a non-refundable tax benefit for those with dependent children under 17.
This credit reduces the total tax owed dollar-for-dollar, offering significant savings compared to deductions. If the credit surpasses the tax liability, the amount is capped at zero, with any remaining credit forfeited. Depending on income and eligibility, filers may receive the full credit or a partial refund.
This system enables more considerable savings than standard deductions. In past years (2020-2021), the CTC was extended to non-filers and those without jobs, allowing some individuals to claim up to $3,600 in credits beyond stimulus payments and federal benefits like SNAP and WIC.
Eligibility criteria for the Child Tax Credit
The IRS states that eligible filers can claim the credit for children with valid Social Security Numbers issued for employment in the US.
The definition of a “qualifying child” for 2023 includes several criteria:
Age under 17 at year-end
Related as child, stepchild, foster child, sibling, or descendant
Resided with the filer for more than half the year
Received no more than half of their own support during the year
Claimed as a dependent on the tax return
Not filing jointly with a spouse unless claiming a refund
U.S. citizen, national, or qualifying resident alien
Filers earning up to $200,000 (or $400,000 for joint returns) qualify for the full credit. Higher earners may still qualify partially.
Additional Child Tax Credit (ACTC)
Filers who can't fully utilize the CTC because of low tax liability may be eligible for an ACTC, which offers a partial refund. For 2023, this cap is set at $1,600 per eligible child.
To qualify for ACTC, applicants must:
Have earned income of at least $2,500, or
Have three or more qualifying dependents
Exclude foreign-earned income by not filing Forms 2555 or 2555-EZ
Filing process for CTC and ACTC
Claims are made through federal tax forms, including Form 1040 or 1040-SR, due by April 15, 2024. Extensions allow filing until October 15, 2024. Applicants must also complete Schedule 8812 to determine credit and refund amounts, ensuring dependents have valid Social Security Numbers.
State-level Child Tax Credits
Aside from federal benefits, some states—like California, New York, Oregon, and others—offer their own CTC programs. Requirements differ across states, so check local tax websites for specifics.
Additional Dependent Benefits
Qualifying parents may also access other credits like the Child and Dependent Care Credit, Earned Income Tax Credit, Adoption Credit, and Education Credits, which help offset childcare costs. For those who don't qualify for CTC, the ODC (Other Dependent Credit) offers up to $500 for other dependents, including adults.
The IRS provides an Interactive Tax Assistant online to help taxpayers determine eligibility and filing options. Utilizing tax software can simplify the process further.
