The Child Tax Credit is for individuals who claim a child as a dependent, but only if the child meets certain conditions, such as being under the age of 17. The credit applies not only to sons and daughters, but includes stepchildren, foster children, brothers, sisters, stepbrothers, stepsisters, half-brothers, half-sisters, or a descendant of any of these people, such as a grandchild, a niece or a nephew.
The Child Tax Credit was created in 1997 and has been expanded several times since, most recently in 2020. The COVID-19 pandemic profoundly affected how, where and when people work. The federal government responded by approving pandemic relief legislation that included changes to the Child Tax Credit.
The 2023 Child Tax Credit is worth up to $2,000 per qualifying child, and $1,600 of that amount is refundable. This is for those with a modified adjusted gross income of $400,000 or below if your filing status is married, filing jointly, or $200,000 or below for all other filers. If your modified adjusted gross income exceeds these limits, the credit gets reduced by $50 for each $1,000 that the income exceeds the threshold.
For the 2024 tax year, the refundable portion of the credit increases to $1,700 per qualifying child. That means eligible taxpayers could receive an additional $100 back per qualifying child as a tax refund. Income limits do apply. Also, in a presidential election year, it can be hard to predict what changes we may see in the tax laws.
Please reach out to your LMC professional with any questions on the Child Tax Credit.