Child Tax Credit Update – CTC Eligibility and Proposed Expansion 

As of 2024, the CTC has reverted to its pre-pandemic structure. This means the credit is worth up to $2,000 per qualifying child. There are also income thresholds that affect how much of the credit you can claim on your tax return.

Child Tax Credit Update

The Child Tax Credit (CTC) for the 2024 tax year (tax returns filed in 2025) is worth $2,000 per qualifying child, with $1,700 being potentially refundable through the additional child tax credit. 

The proposed expansion of the CTC in 2024, as outlined in the Tax Relief for American Families and Workers Act of 2024, would increase the refundable amount to $1,800 in the current filing season. 

In 2025, there will be $2,000 in taxes, and in 2024, $1,900. The base child tax credit would also be adjusted for inflation for tax years 2024 and 2025.

Child Tax Credit Eligibility 

There are several requirements you need to meet to claim the Child Tax Credit (CTC) on your tax return. These include:

  • By the end of the tax year, the child has to be under the age of 17.
  • The child must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew).
  • You must have provided more than half of the child’s financial support during the year.
  • You must be allowed to claim the youngster as a dependent on your taxes.
  • The child must be a U.S. citizen, U.S. national, or a U.S. resident alien.
  • In most situations, the child must have lived with you for at least half of the year.
  • There are income thresholds that affect how much of the credit you can claim.

Income Limits

There is no minimum income requirement to claim the CTC. However, the amount of credit you receive may be reduced depending on your Modified Adjusted Gross Income (MAGI). Here’s a general overview:

  • Full Credit: You qualify for the full amount of the credit if your MAGI is below $200,000 for single filers, $400,000 for married couples filing jointly.
  • Phased Out Credit: If your MAGI exceeds the above thresholds, the credit amount gradually decreases until it reaches zero. The decrease is $50 for every $1,000 your income is over the limit.

Proposed Expansion of Child Tax Credit 

The proposed expansion of the Child Tax Credit aims to make it more accessible and beneficial for low-and middle-income families. The key changes are:

  • Increased Credit Amount: The credit per child would gradually increase to $2,000 by 2025, adjusted for inflation. This is compared to the current maximum of $2,000 per child.
  • Monthly Payments: Similar to the temporary expansion during the pandemic, the CTC would be distributed in advance monthly instalments. 
  • The proposed amounts haven’t been finalised, but estimates suggest $250 or $300 per child depending on age. Currently, the credit is claimed as a lump sum when filing your tax return.
  • Full Refundability: Under the proposed expansion, the credit would remain fully refundable. 
  • This means even families with no tax liability would receive the full amount of the credit. Currently, a portion of the credit is non-refundable, which could limit the benefit for low-income families.

Claiming Child Tax Credit

The Child Tax Credit is typically claimed when you file your tax return and not through a separate online process. The following steps include:

  • Gather your documents: You’ll need your Social Security number, filing status, and information about your dependents, including their Social Security numbers, dates of birth, and proof of residency.
  • File your tax return: The IRS offers a free online filing service called IRS Free File 
  • You can also use tax preparation software or a tax preparer.
  • Claim the credit: During tax filing, you’ll indicate that you have qualifying children and claim the Child Tax Credit. 
  • The specific forms and instructions will vary depending on the tax filing software you use.

Potential Benefits of Expanded Child Tax Credit

The proposed expansion has the potential to impact millions of families. Here are some potential benefits:

  • The expanded Child Tax Credit (CTC) has been shown to reduce child poverty levels by 30%.
  • It is credited with lowering child poverty levels by 30% and providing social benefits of $982 billion per year, or $10 in benefits for every $1 of investment.
  • The extended CTC is an investment in children’s present well-being as well as their future success and mobility, which benefits the entire economy.
  • The expanded CTC has been shown to increase high school and college graduation among childhood CTC recipients and their families.
  • A permanently expanded CTC would boost high school and college graduation among childhood CTC recipients and their families.
  • The expanded CTC would increase children’s lifetime earnings and education, with Black children from families with low incomes experiencing earnings increases of 10 to 17 percent at age 30.

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