Child Tax Credit 2023 – 2024: What You Need To Know To Qualify

The child tax credit — a dollar-for-dollar reduction of your tax liability— is for qualifying taxpayers who have and support children. If you’re eligible, the credits you receive could be significant depending on the age and number of children you have.

Let’s take a closer look at the child tax credit, including its benefits, how to qualify and how to receive the credit.

What Is The Child Tax Credit?

The child tax credit (CTC) is fully refundable and can benefit taxpayers and their dependents under 17 years old. A refundable tax credit means that you may qualify for a tax return if the amount of credit reduces your tax liability to below zero. The money you may receive from the CTC is meant to help lessen the burden of taking care of your children.

Keep in mind that tax credits are different from tax deductions. Tax credits will directly lower the amount of taxes you may owe. On the other hand, tax deductions lower your taxable income, which could in turn lower the amount of taxes you owe.

History Of The Child Tax Credit

The child tax credit (CTC) was first enacted as a $400 nonrefundable credit as part of the Taxpayer Relief Act of 1997. It was raised to $500 in 1998. The Economic Growth and Tax Relief Reconciliation Act of 2001 raised the amount to $1,000, and the Emergency Economic Stabilization Act of 2008 expanded the eligibility for the credit.

The Tax Cuts and Jobs Act in 2017 doubled the Child Tax Credit to $2,000, increased the income eligibility and reduced the threshold to qualify for refunds. The American Rescue Plan Act of 2021 increased the child tax credit to $3,600 per child under 6 and $3,000 per child up to 17 years old as an attempt to provide economic stimulus, and was only applicable for that year. The Tax Cuts and Jobs Act is still in effect, though it is set to expire on December 31, 2025.

How The Child Tax Credit Works

If you qualify, the child tax credit will lower the total amount of taxes on a dollar-for-dollar basis. For example, if you owe $15,000 in taxes and qualify for a $2,000 child tax credit, without taking other deductions and credits into account, you'll lower your tax liability to $13,000.

You will need to ensure you meet the child tax credit qualifications to be able to claim it on your income tax return. Some of these criteria include having a Social Security number and having a dependent who is an eligible child who has lived with you for a certain period of time. If you qualify, the credit will be applied when you file Form 1040 and attach a completed Schedule 8812 for your income tax. 

Who Is Eligible For The Child Tax Credit?

In order to qualify for the child tax credit, the following criteria must be met:

• Relationship: The child must be your son, daughter, stepchild, brother, sister, stepbrother, stepsister, foster child or a descendant of any of these people (such as your nephew, niece, grandchild).
• Age: The qualifying child must be 17 years or younger at the end of the tax year.
• Citizenship: The qualifying child must be a U.S. citizen, U.S. national, or a U.S. resident alien.
• Residency: The qualifying child must have lived with you for at least 6 months in 2023 (there may be some exceptions, such as if you are divorced or separated).
• Financial support: The qualifying child must not have provided more than half of their own financial support during the year in which you're claiming the credit.
• Income: You need to earn at least $2,500 to qualify or have at least three dependents if your income is below this amount. As your income increases, it can affect your eligibility for credits like the child tax credit and change which federal income tax bracket you are in.
• Filing status: You need to accurately file your child as a dependent on your tax return. This means that the dependent you claim needs to be younger than 19 years old or 24 years old if they’re a full-time student (for a minimum of 5 months in a calendar year), or no age limit if they’re considered permanently disabled. Your child also cannot file a joint return or file one in order to receive a refund for estimated taxes paid or withheld income tax.

To understand what you may qualify for, you can check out the IRS’s Interactive Tax Assistant tool or speak with a trusted tax professional.

What Are The Child Tax Credit Income Limits For The 2023 Tax Year?

The income limit for the 2023 tax year is $200,000 or $400,000 if you're filing a joint return. If your modified adjusted gross income on your return is more than $200,000 ($400,000 if you’re married, filing jointly), the amount of child tax credit you can claim will be reduced.

How Much Is The 2023 Child Tax Credit?

For the 2023 tax year (returns filed in 2024), the child tax credit is up to $2,000 for each qualifying dependent. The credit decreases if your modified adjusted gross income exceeds certain income limits. For married couples filing jointly, it’s $400,000. For all other filers, it’s at least $200,000. You or your spouse if filing jointly can't exclude any foreign earned income — you are required to fill Form 2455 or Form 2555-EZ.

For every $1,000 your income is over the threshold, the credit decreases by $50. The refundable portion of the child tax credit is worth up to $1,500. The exact amount you may receive can be complex, especially if you have three or more dependents. It’s best to fill out the appropriate forms or seek the help of a trusted tax professional to estimate how much you may qualify for.

How To Claim The Child Tax Credit

If you believe you qualify for the child tax credit when filing taxes, you will need to complete the following steps:

• Use Form 1040: This form is for individual taxpayers, whether you file a separate or joint tax return. It has different sections you will need to fill out to determine your taxable income and whether you owe taxes or are entitled to a refund. In most years, including the 2023 tax year, you will need to file the form along with your taxes by April 15, 2024. Even if you don’t meet the gross income requirements to file Form 1040, you will need to file one if you want to qualify for the child tax credit.
• Fill out Form 1040: Filling out Form 1040 can be fairly straightforward as long as you have all the information readily available, such as your Social Security number, your child's information and any tax forms (like a W-2) to report your earned income. You can use tax preparation software which can help cut down the overwhelm when it comes to filling out the form in its entirety. You will also need information on hand for any qualifying deductions, especially if you chose to submit itemized deductions.
• Fill out Schedule 8821: This part of Form 1040 determines whether you qualify for any child credits or any advance tax credits you may have received.
• Submit your income tax return: You can file your tax return electronically or by mail. You will need to wait until the IRS has processed your return to see whether you will receive a full or partial child tax credit.

When You Should Expect Your Child Tax Credit Payment

It usually takes around 21 days for the IRS to issue a refund if you qualify, assuming you filed your income taxes electronically. If you filed by mail it could take longer. The IRS may need to review your tax return further if there are any errors, omissions, or discrepancies — in this case your return (and potential refund) could take longer.

In some cases, the IRS may mail you a letter if your return is being audited. You must follow any instructions stipulated on the letter you receive. For example, if the IRS requires you to prove that your child lived with you for at least 6 months out of the year or asks for proof of your relationship to the child, you must provide it. Otherwise, your child tax credit payment could be further delayed or even denied.

Other Credits For Children And Dependents

Aside from the child tax credit, the IRS offers other tax credits for those with children and other qualifying dependents. The child and dependent care tax credit (CDCTC) offers a percentage of any dependent or child care expenses you paid throughout the year. You can qualify for up to $3,000 for one qualifying dependent or $6,000 for two qualifying dependents. This amount will start to decrease if your adjusted gross income (AGI) is higher than $15,000. Those with an AGI of $43,000 or more may only be eligible to receive the $1,200 minimum amount.

Other than income requirements, you can only qualify for this credit if you have paid expenses to care for your qualifying child or dependent so that you can work or actively look for work. You will also need to indicate the name of the person or organization that provided the care. Unlike the child tax credit, the CDCTC is nonrefundable. That means if this tax credit reduces your tax liability to less than zero, you won’t qualify for a refund (assuming you don’t qualify for other refundable tax credits).

Another credit you may qualify for is the credit for other dependents. Qualifying taxpayers can claim this on top of the child and dependent care credit. The credit for other dependents is for any dependents that qualify, have a Social Security or Individual Taxpayer Identification Number, and are supported by the taxpayer filing the return. The qualifying dependent doesn’t have to be related to you, as long as you can prove you provided financial assistance and that they are a dependent on your tax return.

If you qualify, you may receive up to a $500 credit, which is nonrefundable. Like the CDCTC, you can’t claim this tax credit with the child tax credit or additional child tax credit. 

The Bottom Line: The Child Tax Credit Can Reduce Your Tax Bill

The child tax credit is a dollar-for-dollar reduction on your tax liability — it’s considered a refundable tax credit. Your eligibility will depend on factors like your income, whether you have a qualifying child and if you claim them on your tax return. Some child tax credit qualifications include age and income limits, and proof that you provided most of the financial support for your child. Filling out Form 1040 and providing accurate information will help you receive any potential refunds more efficiently.

As the child tax credit is meant to help you better afford to take care of your children, knowing how to manage your finances can also help relieve some of the pressures. One such way of doing so is understanding how much income you have and what you’re spending your money on. Tracking your finances (including upcoming expenses) can be simpler by using automated tools. Consider downloading the Rocket Money℠ mobile app to track and stay on top of your financial life.