The child tax credit (CTC) is a federal tax benefit that helps families with children reduce their tax liability and potentially receive a refund. The CTC has undergone some changes in recent years, and there is a new bipartisan bill that aims to enhance it further. Here are some of the key questions and answers about the CTC for 2024.
What is the current child tax credit for 2024?
For the 2024 tax year, the CTC is worth up to $2,000 per qualifying child under the age of 17. The credit is nonrefundable, which means it can only reduce your tax bill to zero, but not below. However, some taxpayers may be eligible for a partial refund of up to $1,800 through the additional child tax credit (ACTC), which is a refundable credit.
To qualify for the CTC and the ACTC, you and your child must meet certain requirements, such as:
- The child must be your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of them (such as a grandchild, niece, or nephew).
- The child must have lived with you for more than half of the year.
- The child must not have provided more than half of their own support.
- The child must be a U.S. citizen, national, or resident alien.
- The child must have a Social Security number that is valid for employment.
You must also have earned income in 2024 and meet certain income thresholds to claim the full credit. The CTC begins to phase out for taxpayers with modified adjusted gross income (MAGI) above $400,000 for married couples filing jointly, or $200,000 for all other filers. The credit is reduced by $50 for every $1,000 of income above the limit.
How to claim the $3,600 child tax credit?
The $3,600 child tax credit was a temporary expansion of the CTC that was part of the American Rescue Plan Act of 2021. It increased the credit amount to $3,600 for children under 6 and $3,000 for children between 6 and 17. It also made the credit fully refundable and allowed eligible families to receive monthly payments of up to $300 per child from July to December 2021.
The $3,600 child tax credit is not available for the 2024 tax year, unless Congress extends it or makes it permanent. However, if you qualified for the credit in 2021, you can claim the remaining half of the credit when you file your 2021 tax return in 2022. You will need to fill out Form 8812, Child Tax Credit and Credit for Other Dependents, and attach it to your Form 1040 or 1040-SR.
Has the new child tax credit passed?
The new child tax credit is a proposed bill that would enhance the CTC and the ACTC for the 2024 tax year and beyond. The bill was introduced by Sen. Ron Wyden (D-OR) and Rep. Jason Smith (R-MO) in January 2024, and it has bipartisan support. However, the bill has not passed yet, and it faces some challenges in Congress.
The new child tax credit would increase the refundable portion of the CTC to $1,900 in 2024 and $2,000 in 2025. It would also index the credit amount and the income phaseout thresholds to inflation, and make the credit available to families in U.S. territories. Additionally, the bill would provide tax breaks for businesses and simplify the tax code.
The new child tax credit is smaller than the expanded CTC that was part of the American Rescue Plan, which provided monthly payments to families and lifted millions of children out of poverty. However, the new bill is more likely to gain approval from moderate Democrats and Republicans, who have expressed concerns about the cost and the work incentives of the previous expansion.
Can I claim both the child tax credit and the child and dependent care credit?
Yes, you can claim both the child tax credit and the child and dependent care credit (CDCC) if you meet the eligibility criteria for both credits. The CDCC is a tax benefit that helps working parents pay for the care of their children or other dependents, such as a spouse or a parent who is physically or mentally incapable of self-care. The CDCC is worth up to 35% of your qualifying expenses, depending on your income level.
To qualify for the CDCC, you must have earned income in 2024 and have work-related care expenses, among other rules. You can seek the credit for up to $3,000 of expenses for one child or dependent, or $6,000 for two or more children or dependents. The actual credit is a percentage of those expenses. See IRS Publication 503 for the formulas.
The CDCC is not refundable, which means it can only reduce your tax liability, but not below zero. However, some states offer their own versions of the CDCC, which may be refundable. Check with your state tax agency for more information.
Conclusion
The child tax credit is a valuable tax benefit that can help families with children save money on their taxes and receive a refund. The CTC has changed over the years, and there is a new bill that aims to improve it further. However, the future of the CTC is uncertain, and it depends on the outcome of the legislative process. Therefore, it is important to stay informed and plan ahead for your tax situation. You can use online tools, such as NerdWallet’s child tax credit calculator, to estimate how much you may receive from the CTC and the ACTC. You can also consult a tax professional for more guidance and advice.
Source:
(1) Child Tax Credit 2023-2024: Requirements, How to Claim – NerdWallet. https://www.nerdwallet.com/article/taxes/qualify-child-child-care-tax-credit
(2) Here’s what’s in the new bill to expand the child tax credit. https://www.marketplace.org/2024/01/17/heres-whats-in-the-new-bill-to-expand-the-child-tax-credit/
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