Basics on the CTC
The Child Tax Credit (CTC) is a federal tax credit that helps families with qualifying children reduce their federal income tax liability.
The child tax credit comprises two components:
- Nonrefundable child tax credit (CTC); and
- The refundable portion of the CTC, which is the Additional Child Tax Credit (ACTC).
For a parent or legal guardian to claim the CTC, their child must meet the definition of a qualifying child for federal tax purposes. A qualifying child meets the following requirements for a given tax year:
CTC Credit Amounts Available for 2023
The child tax credit amount for the 2023 tax year is $2,000 per child. The refundable portion of the CTC, also called the Additional Child Tax Credit (ACTC), is $1,600 of the $2,000 amount.
Parents must remember that the CTC amounts are phased out depending on their income. The credit amount is reduced by $50 for every $1,000 your modified adjusted gross income exceeds the relevant threshold.
Pending Legislative Changes in 2024
The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) is a piece of pending legislation that could make some changes to the child tax credit. The pending changes, if approved, could even be applied retroactively to the 2023 tax year.
The proposed changes increase the maximum refundable amount of the CTC available to taxpayers. Under the current legislation, the maximum Additional Child Tax Credit (ACTC) is $1,600. Congress wants to change the refundable portion to $1,800, a $200 increase from the current limit.
Many taxpayers wonder whether they should wait to file their tax returns in case the bill is signed into law after they submit their Form 1040 (US Individual Income Tax Return).
The IRS has confirmed that if a taxpayer files early and the bill becomes law after their tax return is submitted, the IRS will automatically make the adjustments and issue the taxpayer a refund for the difference.
Additional Pages Covering the Child Tax Credit
- Filing Amended Form 1040 for the CTC
- What is the Support Test
- Impact on Unemployment Benefits
- Income Thresholds and Phaseouts
- CP79A Notice for Denied CTC
- What is the Additional Child Tax Credit
- Does the Child Need an SSN
- What is a Qualifying Child
- Sample Form 8812 for 2022
- Form 8862 for Disallowed Credit
- Grandparents Claim Grandchild for CTC
- CTC with No Income – 2022 Tax Returns
- CTC with No Income – 2023 Tax Returns
More Information on the Child Tax Credit
Taxpayers seeking more information on child tax credits can visit the IRS website and the IRS Form 8812 instructions for CTC and ACTC. The IRS Publication 501 (Dependents, Standard Deductions, and Filing Information) contains guidance on which persons can be claimed as dependents on Form 1040 (US Individual Income Tax Return).