January 8, 2024
The Child Tax Credit is for individuals who claim a child as a dependent if the child meets certain conditions.
The Child Tax Credit was created in 1997 and has been expanded several times since, most recently in 2020. The COVID-19 pandemic profoundly affected how, where and when people work. The incredible disruption this caused affected people's incomes and livelihoods, and the federal government responded by approving pandemic relief legislation that included changes to the Child Tax Credit.
The expanded federal Child Tax Credit expired last year. However, some states have their own versions and others are planning to add them. Check with your state.
The 2023 Child Tax Credit is worth up to $2,000, and $1,600 of that amount is refundable. That's the number that covers calendar year 2023 for the tax return due in April 2024. This is for those with a modified adjusted gross income of $400,000 or below (married, filing jointly) or $200,000 or below (all other filers). If your MAGI exceeds the preceding limits, your credit gets reduced by $50 for each $1,000 that your income exceeds the threshold.
However, for the 2024 tax year (the return you'll file in 2025), the refundable portion of the credit increases to $1,700. That means eligible taxpayers could receive an additional $100 back per qualifying child as a tax refund. Income limits do apply. Also, in a presidential election year, it can be especially hard to predict what changes we may see in the first half of 2024.
This is just a summary — based on your situation, the math can get complex. Your best bet is to have all your tax forms ready when you speak to your tax professional about how much of a break you can get.
Source: Industry Newsletters ©2024