Child Tax Credit 2023: Amount, Schedule, Eligibility, History and Error

Child Tax Credit 2023: In order to help American taxpayers with children financially, the federal tax benefit known as the child tax credit is crucial. A tax credit of up to $2,000 per qualifying dependant is available to parents of children under the age of 17. $1,600 of the credit may be refundable for 2023.

We’ll go over who is eligible, how to apply, and how much you could get for each child.

What is Child Tax Credit?

Children under the age of 17 who are dependent on their taxpayers are eligible for the child tax credit (CTC), a nonrefundable tax benefit. The credit has the potential to completely eliminate your tax liability by dollar-for-dollar lowering it. Through the “additional child tax credit” (ACTC), some taxpayers may also qualify for a partial return of the benefit.

The age of the child and their relationship to the taxpayer are both taken into consideration when determining whether a taxpayer and their children are eligible.

To fully benefit from the benefit, taxpayers must also meet certain income requirements because the credit fades off for high incomes. Your credit amount may be reduced whenever your modified adjusted gross income exceeds the eligibility threshold, or you may be disqualified.

How much will the Child Tax Credit 2023 be?

Child tax credit 2023 (filing taxes in 2024)

If your modified adjusted gross income is $400,000 or less (married filing jointly) or $200,000 or less (all other filers) for 2023, the child tax credit is worth $2,000 per qualified dependent kid. The additional child tax credit, often known as the refundable part, has a maximum value of $1,600.

Your credit will be lowered by $50 for every $1,000 that your MAGI exceeds the aforementioned ceilings.

Child tax credit 2023 (taxes due in 2023) 

You can still claim the CTC on your return when you file if you haven’t yet turned in your 2022 tax return, which was due on April 18, 2023, or by October 16, 2023, with a tax extension. The credit is worth $2,000 for each eligible child for the 2022 tax year, with up to $1,500 of the amount being refundable.

Child Tax Credit 2024: Will there be a Child Tax Credit in 2024?

Eligibility Criteria

When filing their tax returns in 2024, taxpayers can claim the child tax credit for the 2023 tax year. There are typically seven “tests” that you and your eligible child must pass.

Age: At the end of 2023, your child must have been under the age of 17.

Relationship: The child you’re claiming must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepsister, or a descendant of any of those people (for example, a grandchild, niece, or nephew).

Dependent status: The child must be appropriately claimed as a dependent by you. Additionally, unless they do so to request a refund of withheld income taxes or anticipated taxes paid, the child cannot submit a joint tax return.

Residency: The child for whom you are filing a claim must have resided with you for at least half of the previous year (there are several exceptions to this criterion).

Financial support: During the previous year, you must have supported the kid with at least half of their needs. In other words, if your qualified child has been financially independent for longer than six months, they are probably not eligible.

Citizenship: According to the IRS, your child needs to be a “U.S. citizen, U.S. national, or U.S. resident alien,” and they also need to have a valid Social Security number.

Income: Parents or carers claiming the credit are frequently prohibited from earning more than a specific amount. Depending on how much your income exceeds that limit, the credit gradually decreases until it is no longer available.

Additional Child Tax Credit

You might be able to receive a partial refund by claiming the additional child tax credit if you are eligible for the CTC but are unable to utilise it fully because you owe no taxes or less than the credit amount.

All of the aforementioned income and dependant requirements must be met in order to qualify for the ACTC, but there are also some additional requirements:

1. Either you or your spouse must earn at least $2,500 per year.
2. Or have three or more dependents who qualify
3. Earned income is sometimes defined as cash received from jobs or self-employment. It excludes income from passive sources including dividends, pensions, welfare, and unemployment compensation.
4. You or your spouse (if you are married and filing jointly) cannot claim Form 2555 or Form 2555-EZ as an exception for foreign-earned income.

Your additional child tax credit is calculated by the IRS by multiplying your earned income over $2,500 by 15%. You may claim either that amount or, if less, the amount of the CTC credit that you were qualified for but were unable to utilise in its entirety. But bear in mind that for the 2023 tax year, each qualified dependent can only receive a maximum refund of $1,600. It’s an increase from $1,500 in 2022.

The calculation can be trickier if you have three or more dependent children. Information on Schedule 8812 is available.

How to apply for the child tax credit 2023?

On the federal tax return (Form 1040 or 1040-SR) that you submit before April 15, 2024, or by October 2024 with a tax extension, you may claim the child tax credit and the additional child tax credit for tax year 2023. Along with your 1040, Schedule 8812 (“Credits for Qualifying Children and Other Dependents”) must be completed. You can use this schedule to determine your child tax credit amount and, if appropriate, how much of a partial refund you are eligible to claim.

Most high-quality tax preparation software walks you through the process of claiming the child tax credit with a series of interview questions, making it simpler and even automatically filling out the papers for you. You can also qualify for free tax preparation software through the IRS’ Free File programme if your income is below a specific threshold.

When to anticipate your refund for the child tax credit?

Early filers should be aware that the IRS must wait until mid-February to release a refund for a return claiming the child tax credit. However, in general, filers who use direct deposit as their refund method, e-file, and submit an error-free return should see refunds arrive in their accounts three weeks after submission.

In general, wait times rise if you file on paper. You may also make sense of what’s happening with your money with the aid of the agency’s “Where’s My Refund” tool.

Consequences of Child Tax Credit Error

Your refund or the portion of it that reflects the child tax credit may be delayed if there is a mistake on your tax form. It may also imply that the IRS will reject the entire credit in specific circumstances.

If your CTC claim is rejected by the IRS:

• Any CTC amount given to you inadvertently must be repaid, including with interest.
• Before you may reapply for the CTC, you might need to submit Form 8862, “Information To Claim Certain Credits After Disallowance.”
• You could be liable for a fine of up to 20% of the credit amount claimed if the IRS finds that your claim for the credit is incorrect.

Child Tax Credit By State

A few states, such as California, Colorado, and New York, in addition to the federal child tax credit, also have their own state-level CTCs, which you might be able to use when submitting your state return. For more information, go to the state’s department of taxation website.

History

The CTC has undergone a number of adjustments throughout the years, much like other tax credits. The Tax Cuts and Jobs Act (TCJA), which was passed in 2017, set forth detailed guidelines for claiming the credit that would be in effect from 2018 through 2025. However, the credit was temporarily altered for the 2021 tax year by the American Rescue Plan Act of 2021 (the coronavirus relief law), which has raised questions about which modifications are long-term.

• 1997: The Taxpayer Relief Act first established a $500 nonrefundable credit.
• 2001: The Economic Growth and Tax Relief Reconciliation Act raised the credit’s per-dependent limit to $1,000 and made it partially refundable.
• 2017: Several adjustments to the credit were implemented, and they became effective from 2018 through 2025. As part of this, the credit cap was raised to $2,000 per dependant, a new income cutoff was established, and it was made sure that the partially refundable portion of the credit was annually adjusted for inflation.
• 2021: The American Rescue Plan Act temporarily changed the credit in a number of ways for the 2021 tax year alone. As a result, the credit was increased to a maximum of $3,600 for each eligible child, made completely refundable, and made 17-year-olds eligible. Additionally, many taxpayers received half of the credit as advance monthly payments from July through December 2021, which was a first in American history.
• 2022–2025: The 2021 ARPA enhancements came to an end, and the credit returned to the TCJA’s original regulations, which included the $2,000 cap per eligible kid. Each year, the refundable part is changed to reflect inflation.

Frequently Asked Questions

What is the value of the child tax credit?

The child tax credit is worth up to $2,000 per eligible dependant for the 2022 tax year (returns submitted in 2023). The additional child tax credit makes the credit partially refundable, so some taxpayers may be eligible for a tax refund for any overage up to a maximum of $1,500.

The child tax credit continues at $2,000 per kid for tax year 2023 (taxes submitted in 2024), the same as in 2022, but the refundable component rises to $1,600.

Is the child tax credit taxable?

No. This tax credit is nonrefundable. It can therefore reduce your tax liability by the credit’s amount. Through a partially refundable benefit known as the extra child tax credit, you might be able to obtain some of the credit back in the form of a refund

Will the child tax credit undergo a stimulus-style modification in 2023?

The American Rescue Plan Act increased the benefit up to $3,600 per dependent and issued advance payments from July through December 2021, among other temporary changes to the credit for 2021.

Current modified benefit should be reinstated, but these pandemic-era improvements have not been carried over for current tax year despite widespread public support for it.