Why Do You Lose Child Tax Credit at Age 17?
Published on August 18, 2023
Updated on October 28, 2024
by Clark Stott
Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.
Table of Contents
Why do you lose the Child Tax Credit at age 17?
To be eligible for the US Child Tax Credit, a child must generally be under 17 at the end of the tax year. This credit helps families with the costs of raising children, so the year your child turns 16 is the last year you can apply for the Child Tax Credit.
Historically, turning 17 is seen as a key milestone in a child’s transition to adulthood, often marking the end of high school and the start of higher education or entering the workforce.
Can US citizens living abroad claim the Child Tax Credit?
Yes, they can, and many don’t. US citizens and Green Card holders living outside the US can claim the Additional Child Tax Credit (ACTC). This is a refundable credit, which means it’s real money in your pocket.
For tax year 2024, the maximum refundable credit is US$1,700 per eligible child or dependent.
What is the Child Tax Credit?
The Child Tax Credit (CTC) is a federal tax credit designed to provide financial relief to parents and guardians of dependent children. The CTC currently provides up to US$2,000 (non-refundable) which can significantly reduce your tax bill, making it a valuable resource for families.
There are several types of US Child Tax Credits. The main credit for US citizens living abroad is the Additional Child Tax Credit (ACTC).
What are the requirements for claiming ACTC?
The criteria for claiming the Additional Child Tax Credit are below:
- Age limit: The child must be under 17 at the end of the US tax year (December 31).
- SSN: The child or dependent must have a Social Security Number issued by the tax filing deadline.
- Relationship: The child must be your son, daughter, stepchild, foster child, sibling (including half or step-siblings), or a descendant, such as a grandchild, niece, or nephew.
- Dependent status: The child has been claimed as dependent on your taxes.
- Financial support: The child should not have contributed more than half of their financial support.
- Residency: The child must have lived with you for at least half the year and is a US citizen, national, or resident alien.
- Income limit: Generally, your income should not exceed a certain threshold to claim the total CTC amount. Depending on how much your income exceeds that threshold, the credit gets reduced until it is eliminated.
CTC annual income limit for 2024:
|
Filing status |
Income limit |
|
Individual and married filing separately |
US$200,000 |
|
Married filing jointly |
US$400,000 |
For additional assistance, you can check your eligibility and calculate your Additional Child Tax Credit
Why use the IRS Streamlined Tax Amnesty Program?
It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.
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Are there exceptions to the age eligibility rule?
Yes, special situations call for exceptions in the age limit of a child. Here are the circumstances when you can claim credit for a child who is 17 or older:
- Children with disabilities: The CTC can still be claimed under specific qualifications for when they turn 17. It’s advisable to consult IRS guidelines to verify eligibility.
- Non-biological or adopted child care: For children under the care of relatives or non-biological parents, a portion of the CTC can be claimed, or even other related credits, under specific qualifications.
Are there other credits I can claim for my child?
Yes, aside from the CTC or ACTC, other available credits can be claimed depending on your or your child’s situation.
Here is the list of credits you can check for your children:
- Credit for Other Dependents: It is typically for children who no longer qualify for the Child Tax Credit.
- Dependents of any age, including 17 and older.
- Maximum credit amounts to US$500 per dependent.
- You can claim this in addition to other available credits.
- Child and Dependent Care Credit: This credit helps you offset the costs of caring for your children while you look for work.
- For children who require constant attention to prevent them from injuring themselves or others.
- The care should enable you to work or look for a job.
- The credit is a percentage of the care expenses incurred for your child for up to US$3,000 per child.
- Education-Related Credits: For children who will enter higher education, you can claim credits such as:
- American Opportunity Tax Credit (AOTC): For tuition and expenses for the first four years of higher education.
- Lifetime Learning Credit (LLC): For tuition and fees for undergraduate, graduate, and professional degree courses.
- Earned Income Tax Credit (EITC): A refundable tax credit for your family to reduce your tax burden.
- Your income must be within a specific threshold set by the IRS.
- The credit amount depends on your income amount and the number of your children.
- Deductions for Medical Expenses: For your children’s significant medical and dental expenses.
- Children 17 and older can claim deductions on prescription medications, medical equipment, and hospital care.
- Adoption Credit and Assistance Programs: Tax benefits offered for your adopted child.
- You can claim credit for adoption fees, court costs, attorney fees, travel expenses, and other expenses directly related to the legal adoption of your child.
- The maximum amount of credit is US$15,950 per child.
Securing other financial aid for your child can be complex, but learning and understanding the available options can significantly help you financially support your child.
How can I plan for my child’s future?
Here’s a general overview of financial planning for your child’s future:
- Evaluate your financial situation: Understand your current financial standing and identify and review any tax benefits available to you and your child.
- Prepare for future education plans: Explore available scholarships, learning incentives, and educational tax credits. Also, consider a college savings plan that may provide tax benefits.
- Review your budget: Adjust your budget to reflect changes in tax obligations and ensure you have an emergency fund for any unforeseen expenses.
- Check your retirement plans: You can start contributions to retirement accounts like 401 or IRA. For existing plans, you can re-adjust your contributions to maximize your distributions.
- Consider other financial support programs: Look for alternative financial aid like scholarships and grants to apply to help cover education costs.
- Consult with a financial advisor: Seek guidance from financial advisors and tax professionals. They can assist you in creating a custom and comprehensive financial plan and optimizing your tax strategy.
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