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Raising kids is expensive. Thankfully, becoming a parent comes with some valuable tax breaks — most notably, the Child Tax Credit (CTC).
At a glance:
- The CTC is worth up to $2,000 per child under 17 in 2023.
- This credit is partially refundable. You might be able to receive up to $1,600 of the credit back as a tax refund.
- The credit amount starts decreasing once your MAGI hits $400,000 for joint filers or $200,000 for all other filers.
What is the Child Tax Credit (CTC)?
The Child Tax Credit (CTC) is a tax credit for parents of dependent children designed to help offset the cost of raising kids.
For tax year 2023, $1,600 of the CTC is refundable (up from $1,500 in 2022), meaning you can claim up to this amount even if you do not owe any taxes or didn’t earn any income last year. On your 2023 return, you can claim the CTC for any children under age 17.
How does the Child Tax Credit work?
Like other tax credits, the CTC is valuable because it reduces your tax bill on a dollar-for-dollar basis. For example, if your adjusted gross income (AGI) was $50,000 in 2022 and you qualify to claim a $6,000 Child Tax Credit, the credit reduces any taxes you owe by $6,000. So, if your tax bill turns out to be $8,000, your $6,000 credit would reduce the total amount of taxes you owe to $2,000.
To recap, up to $1,600 of the Child Tax Credit is refundable this year. So, for example, if you qualify to receive a $6,000 CTC, but you only owe $3,000 in taxes, your tax credit reduces your bill to $0, and you get to pocket $1,600 of the remaining $3,000.
How much is the Child Tax Credit for tax year 2023?
For the 2022 and 2023 tax seasons, the maximum total credit amount is $2,000 per child under age 17.
You qualify to claim the maximum value of the Child Tax Credit if your modified adjusted gross income (MAGI) is $400,000 or below for joint filers or $200,000 or below for all other filers.
If your MAGI is higher than those limits, you could still receive a portion of the increased tax credit. In that event, your credit amount will be reduced by $50 for every $1,000 over the threshold.
Is the Child Tax Credit taxable?
No, the Child Tax Credit is not taxable.
What’s the difference between the Child Tax Credit and the Child and Dependent Care Credit?
The Child and Dependent Care Credit is a tax benefit to help offset some of the costs of childcare for your dependent while you are at work. This credit is designed to make it easier for parents to keep working without putting too much stress on their budget.
If you have a qualifying child, the Child Tax Credit is available regardless of your childcare or other expenses.
What is the Additional Child Tax Credit?
The Additional Child Tax Credit is the refundable portion of the CTC, which means you can claim it even if the credit is greater than your income tax liability for the year. Up to $1,600 per child is refundable with the Additional Tax Credit.
If that sounds complicated, don’t worry. TaxAct® does these calculations for you.
How do I claim the Child Tax Credit or the Additional Child Tax Credit?
TaxAct will determine if you qualify for the Child Tax Credit or the Additional Child Tax Credit based on your answers to a few simple questions.
Child Tax Credit qualificationsINFOGRAPHIC-CON-48-TY22-563-How to Qualify for the Child Tax Credit
Do I qualify for the Child Tax Credit?
Your eligibility for this tax credit depends on your relationship to the child and the child’s age. For tax year 2023, the child you are claiming the credit for needs to be under age 17 as of Dec. 31, 2023. Qualifying dependents must be your son, daughter, adopted child, foster child, stepchild, younger sibling, stepsibling, or descendant of any of them (such as your niece, nephew, or grandchild).
You must have a valid Social Security number (SSN) and any children you claim must also have a valid SSN.
If the child does not have a valid SSN but does have an individual taxpayer identification number (ITIN), you may be able to claim the Credit for Other Dependents. This is a $500 (non-refundable) credit for dependents who do not qualify for the CTC, such as dependent parents and other relatives or dependents living with you who are unrelated to you.
Do I still qualify for the credit if I have a higher income?
The credit starts to phase out as your income rises. Your credit is reduced if your modified adjusted gross income is more than $200,000 if filing single or $400,000 if married filing jointly.