What is the Child Tax Credit?
Published on December, 21 2017
Updated on July 30, 2024
by Grace Lorraine Angeles
Grace Lorraine, an IRS Enrolled Agent and CPA with 14 years of expat tax experience, specializes in US tax preparation, tax planning, and tax advice for US citizens and Green Card holders living and working abroad.
Table of Contents
History of the Child Tax Credit:
The Child Tax Credit (CTC) was created in 1997 as part of the Taxpayer Relief Act, with an original credit of US$400 per child under the age of 17. This credit was non-refundable for the majority of families.
The CTC was increased to US$500 in 1998, then increased again and made refundable in 2001. To coordinate with the earned income tax credit (EITC), once earnings in 2001 reached US$10,020 for families with two children, there was no further increase. The earnings threshold for refundable CTC was US$10,000 and was indexed for inflation. Families with earnings in excess of this amount could receive a subsidy. When this threshold was reduced due to inflation – for example to US$8,500 in 2008 and US$3,000 in 2009 – the phase-in of the refundable CTC was broken off from the EITC.
The CTC was then increased again in 2012 as a result of the American Taxpayer Relief Act. The credit was increased from US$500 per child to US$1,000 per child. The provisions of the anti-recession stimulus package (American Recovery and Reinvestment Act of 2009) were temporarily extended to reduce the earnings threshold for the refundable CTC from US$10,000 to US$3,000. The Bipartisan Budget Act that came in 2015 then made the US$3,000 threshold permanent.
In 2017, the Tax Cuts and Jobs Act doubled the CTC for children under 17, from US$1,000 to US$2,000 per child. The refundable portion of this credit was indexed to inflation and limited to US$1,400 per child. This became effective in 2018.
As of 2024, the CTC remains US$2,000 per qualifying child. The refundable portion (additional child tax credit) has increased slightly to US$1,600. Legislation has also allowed dependents who did not qualify for the US$2,000 credit to be able to claim a non-refundable credit of up to US$500.
What is the Child Tax Credit?
The Child Tax Credit (CTC) is a tax benefit provided to parents or guardians of dependent children. Its purpose is to alleviate some of the financial burden of raising children.
Are you living outside the United States?
If so, the type of Child Tax Credit that may apply to you is called the Additional Child Tax Credit.
It is different to the regular Child Tax Credit and the Advanced Child Tax Credit. Be careful to specifically claim the Additional Child Tax Credit.
Generally, Child Tax Credits are important for families because it can significantly lower the federal income tax they owe. If they don’t owe tax the credit turns into a refund, providing financial support.
Who qualifies for the Additional Child Tax Credit in 2024?
To qualify for the Additional Child Tax Credit in 2024, certain criteria must be met:
- Age of Children: The child must be under 17 at the end of the tax year.
- Relationship: The child must be your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of these individuals.
- Dependency: The child must be claimed as a dependent on your tax return.
- Citizenship: The child must be a US citizen, US national, or US resident alien.
- SSN: They must have their SSN issued before the tax year deadline.
- Residency: The child must have lived with you for over half of the tax year.
- Support: The child must not have provided more than half of their own support during the year.
Have there been any changes in eligibility before 2024?
No. The eligibility criteria for the Additional Child Tax Credit remains the same, but the eligibility for other Child Tax Credits has changed, so carefully check. You can visit or find more support on our Expat Tax Online Help Group.
How much is the Child Tax Credit worth in 2024?
For the tax year 2024, the Child Tax Credit provides up to US$2,000 per qualifying child under the age of 17 at the end of the tax year.
If you owed the IRS US$2,000, the whole amount would be wiped out by the credit.
If you didn’t owe the IRS, the maximum refundable amount is US$1,600.
Are there differences in amounts based on the child’s age?
No. The credit amount remains the same regardless of whether the child is a toddler or a teenager, as long as they meet the age requirement of being under 17 at the end of the year (December 31).
$500 credit for ‘other dependents’
‘Other dependents’ are eligible for a non-refundable credit up to $500 each. Under the TCJA (Tax Cuts and Jobs Act), dependents not eligible for the $3,600 or $3,000 credits can access a $500 credit. Those eligible for the $500 credit include children aged 18 and children aged 19-24, who were in full time education for at least five months of the year. Some older dependents and children who are non-US citizens can also qualify for the $500 credit.
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How do you claim the Child Tax Credit?
Claiming the Child Tax Credit involves a few steps:
- Determine Eligibility: Ensure that your child meets the eligibility criteria, including age, relationship, dependency status, citizenship, residency, and support tests.
- Complete Your Tax Return: Fill out your federal tax return (Form 1040 or Form 1040-SR).
- Include Relevant Information: Provide details about your qualifying children in the appropriate sections of your tax return, including their names, Social Security numbers, and your relationship to them.
- Calculate the Credit: Use the Child Tax Credit Worksheet (Schedule 8812) provided in the IRS instructions for Form 1040 to calculate the amount of your credit.
- File Your Return: Submit your completed tax return to the IRS, ensuring all information is accurate to avoid processing delays.
Is the Child Tax Credit tax refundable?
Yes. If your Child Tax Credit exceeds the amount of taxes you owe, the Additional Child Tax Credit can help you receive the remaining credit amount as a refund.
How much can be received from the Additional Child Tax Credit?
For the 2024 filing year, the ACTC can provide a refund of up to US$1,600 per qualifying child. If your tax liability is zero or lower than your Child Tax Credit, you can receive up to US$1,600 per child as a refund.
How does income affect Additional Child Tax Credit?
The amount of Additional Child Tax Credit you can receive is influenced by your income. There are income thresholds and phase-out ranges that determine eligibility and the credit amount.
- Single Filers: The phase-out begins at an adjusted gross income (AGI) of US$200,000.
- Married Filing Jointly: The phase-out begins at an AGI of US$400,000.
For incomes above these thresholds, the ACTC amount is reduced by US$50 for each US$1,000 of income over the threshold until the credit is completely phased out.
- Example 1: A married couple filing jointly with an AGI of US$350,000 and two qualifying children. Since their income is below the US$400,000 threshold, they can claim the full US$3,200 (US$1,600 per child).
- Example 2: A single filer with an AGI of US$210,000 and one qualifying child. Since their income exceeds the US$200,000 threshold by US$10,000, their ACTC is reduced by US$500 (US$50 for each US$1,000 over the threshold), making their credit amount US$1,100.
Can you receive the Additional Child Tax Credit if you are self-employed?
Yes, self-employed individuals can receive the Additional Child Tax Credit if they meet the eligibility criteria. The fact that you are self-employed does not affect your ability to claim the ACTC. You can claim the credit on your tax return as long as your qualifying child meets the requirements, such as age, relationship, dependency, citizenship, residency, and support tests.
Are there any changes to the Additional Child Tax Credit for children with disabilities?
The Additional Child Tax Credit itself has not undergone specific changes for children with disabilities for the year 2024.
Parents or guardians of children with disabilities may still benefit from the same ACTC as other qualifying children. Additionally, other credits and deductions, such as the Credit for Other Dependents or the Earned Income Tax Credit (EITC), might also apply and provide further financial relief.
It’s recommended to consult a tax professional to ensure all eligible credits are claimed.
How does the Additional Child Tax Credit interact with other tax credits?
The Additional Child Tax Credit can be claimed alongside other tax credits, such as the Earned Income Tax Credit (EITC), the Credit for Other Dependents, and the Child and Dependent Care Credit.
However, each credit has its eligibility requirements and must be calculated separately.
What happens if your income changes during the year?
If your income changes during the year, it can affect the amount of Additional Child Tax Credit you are eligible to receive.
The ACTC phases out at higher income levels, so a significant increase in income might reduce your credit amount. Conversely, a decreased income might make you eligible for a larger credit or the refundable Additional Child Tax Credit (ACTC).
Can non-custodial parents claim the Additional Child Tax Credit?
Typically, only the custodial parent, defined as the parent with whom the child lived for most of the year, can claim the Additional Child Tax Credit.
However, a non-custodial parent may be able to claim the ACTC if the custodial parent signs a written declaration (Form 8332) releasing their claim to the credit for the specific tax year.
The non-custodial parent must attach this form to their tax return to claim the credit.
