Your Free Guide to the Child Tax Credit

Understanding the Child Tax Credit

The Child Tax Credit is a tax deduction that taxpayers can use to reduce the income tax that they pay each year. In most cases, parents of children from birth through age 16 may be able to deduct $2,000 per qualifying child from the amount that they owe on their income taxes when they file.

In order to qualify, the children must be dependents listed on the tax return, related to the taxpayer, living with the filing taxpayer for at least six months a year and be US citizens. If the filers do not owe taxes, a portion of the Child Tax Credit (up to $1,600) is refundable as long as the taxpayer earned at least $2,500 but less than $400,000 if filing jointly, or $200,000 if filing singly.

What Agency Is in Charge of the Child Tax Credit?

Since the Child Tax Credit is a deduction from your federal income taxes, everything relating to the Child Tax Credit is administered by the Internal Revenue Service (IRS), the taxing agency of the federal government.

The IRS determines your eligibility and the amount you will be getting. They use the data they have on taxpayers from their previous years’ tax returns to make an initial determination of eligibility for the Child Tax Credit.

However, if your family or income circumstances have substantially changed, you do have the opportunity to inform the IRS so that they can make the appropriate changes. In addition to deciding who is eligible to receive the Child Tax Credit payments, the IRS is also responsible for distributing the money directly to American taxpayers.

Determining Your Eligibility

To qualify for the CTC, you generally must have one or more dependent children who:

Are under age 17 for the entirety of 2023
Have a valid Social Security number
Provided half or less than half of their own financial support
Lived with you for at least six months during the year
Are US citizens
And you must have earned less than certain income limits (see the section “How Much Money Do You Qualify to Receive?” below)

You can check to see if your dependent qualifies for the Child Tax Credit in 2024 by using the IRS’ Interactive Tax Assistant tool here: https://www.irs.gov/help/ita/does-my-childdependent-qualify-for-the-child-tax-credit-or-the-credit-for-other-dependents

How Much Money Can You Qualify to Receive?

You can calculate the amount you may be able to receive based on your income. The income that the IRS uses to calculate the amount of your tax credit is based on your modified adjusted gross income (MAGI).

The MAGI can be found on your previous year’s tax return, form 1040, line 7. It also includes the amounts of any of the following that apply to you:

Deductions you took for IRA contributions and taxable Social Security payments
Foreign income you had excluded
Interest from any EE savings bonds you used to pay college tuition
Losses from a partnership
Passive income or loss
Rental losses
Adoption expenses

Most people’s modified adjusted gross income is the same as their adjusted gross income since the add-backs do not apply to them.

Most qualifying taxpayers receive up to $2,000 per child under the age of 17. However, the amount you get is reduced based on your income. The more you earn, the lower the amount of the Child Tax Credit.

There is an income benchmark at which the Child Tax Credit is reduced. For every $1,000 you earn over the income benchmark, your Child Tax Credit is reduced by $50 per qualifying child.

The benchmark in place for 2023 taxes is if you earn more than:

$200,000, or
$400,000 if filing a joint return.

You can use the Interactive Tax Assistant provided by the IRS to help determine if you may qualify: https://www.irs.gov/help/ita/does-my-childdependent-qualify-for-the-child-tax-credit-or-the-credit-for-other-dependents

How and When You Will Receive the Money

To claim the Child Tax Credit, you’ll need to provide information about your children and other dependents on Form 1040, U.S. Individual Income Tax Return. You can find a copy of this form from the IRS here: https://www.irs.gov/forms-pubs/about-form-1040

You’ll also need to attach Schedule 8812, Credits for Qualifying Children and Other Dependents. You can find a copy of this form from the IRS here: https://www.irs.gov/forms-pubs/about-schedule-8812-form-1040

If you are owed a tax refund, how you get this money depends on how you choose to receive refunds. You can sign up for direct deposit, in which case your refund will be deposited directly into your bank account. Otherwise, you can receive a check in the mail.

You can update your address when you file your taxes. If you need to update your address after you have filed, you can use the IRS Form 8822 at: https://www.irs.gov/forms-pubs/about-form-8822