Kids are expensive, but did you know that having kids can actually lower your tax bill?
In today’s post, I’ll explain everything you need to know about the Child Tax Credit and Credit for Other Dependents (ODC), including eligibility requirements, amounts, and how to claim them.
What is the Child Tax Credit?
The Child Tax Credit (CTC) is a tax credit provided to eligible families with dependent children. The purpose of the CTC is to reduce the financial burden of raising children. For qualifying families, the CTC can lead to a substantial reduction in tax liability because like all tax credits, the amount of the credit is subtracted from the family’s tax bill.
Am I eligible for the Child Tax Credit?
In order to qualify for the CTC, you, your child, and your spouse (if filing jointly), must meet these requirements:
- Age: The child must be under 17 years old at the end of the tax year.
- Relationship: The child must be your son, daughter, stepchild, foster child, sibling, half-sibling, stepsibling, or a descendant of any of those individuals (like nieces, nephews, or grandchildren).
- Dependency: You must claim the child as a dependent on your tax return.
- Citizenship: The child must be a U.S. citizen, U.S. resident alien with a Social Security number, or U.S. National (American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens).
- Residency: The child must have lived with you for more than half of the tax year. There are some exceptions for children who were born or died during the tax year and for children who were not living with you due to special circumstances like they were living at a boarding school, staying in a hospital for medical care, or detained in a juvenile facility. There are also some special rules for divorced or separated parents who both want to claim the CTC for the same child.
- Financial Support: The child cannot have provided more than half of their own financial support during the tax year.
- Income: The CTC has income limits that not only affect eligibility for the credit but also the amount of the credit you’ll receive. The income thresholds vary depending on your filing status, and the credit is reduced by $50 for each $1,000 above these thresholds until it’s completely phased. For tax year 2024, the income thresholds for CTC are:
- Married Filing Jointly: The credit begins to phase out if your adjusted gross income (AGI) is above $400,000.
- Single, Head of Household, or Married Filing Separately: The credit begins to phase out if your AGI is above $200,000.
What is the Additional Child Tax Credit (ACTC)?
The CTC is a nonrefundable credit, which means that if your tax bill is less than the amount of the credit, you don’t get that extra amount back as a refund. In other words, the credit can take your tax bill down to $0, but you won’t get a check for the remainder.
However, even if your CTC amount is greater than your tax liability, you’re likely eligible for the Additional Child Tax Credit (ACTC). The ACTC allows families with little or no tax liability (tax bill) to receive part of the CTC as a refund.
To qualify for the ACTC, your family has to meet all of the CTC’s requirements. Additionally, the amount of the ACTC you can receive as a refund phases out at higher income levels just as it does with the CTC.
How much are the Child Tax Credit and Additional Child Tax Credit worth?
The table below shows the CTC and ACTC amounts for recent tax years. You’ll notice that there was a big change to the CTC and ACTC for tax year 2021 as part of the American Rescue Plan stimulus package (remember how those advance child tax credit payments were all the rage that year?).
| Child Tax Credit and Additional Child Tax Credit | ||
|---|---|---|
| Tax Year | Child Tax Credit Amount Per Qualifying Child |
Additional Child Tax Credit Amount Per Qualifying Child (Refundable) |
| 2024 | $2,000 | $1,700 |
| 2023 | $2,000 | $1,600 |
| 2022 | $2,000 | $1,500 |
| 2021 | $3,000 under age 6 $3,600 age 6-17 |
$3,000 under age 6 $3,600 age 6-17 |
| 2020 | $2,000 | $1,400 |
| 2019 | $2,000 | $1,400 |
| 2018 | $2,000 | $1,400 |
What is the Credit for Other Dependents (ODC)?
If you don’t qualify for the CTC and ACTC, you may qualify for the Credit for Other Dependents (ODC) instead. This credit is nonrefundable, but it’s worth up to $500 per qualifying dependent which can include older children, parents, or other relatives that live with you but don’t meet the requirements for the CTC.
How do I claim the Child Tax Credit, Additional Child Tax Credit, or Credit for Other Dependents?
To claim the CTC, ACTC, or ODC, you’ll need to file a federal individual income tax return using Form 1040 and also complete Schedule 8812. The schedule will help calculate your total credit and determine if you qualify for a refund of the ACTC.
Is there anything else I should know about claiming the Child Tax Credit?
There are a few other things to keep in mind when claiming these credits. First, the CTC and ACTC can delay any tax refund you’re receiving since the IRS sometimes takes a closer look at refundable credits.
Also, some states offer their own credits and deductions related to children and dependents, so don’t forget to check with your accountant or your state to make sure you don’t miss out on those as well!
Finally, you may also qualify for the Child and Dependent Care Credit if you are paying for your kids to attend preschool or receive other childcare. If you qualify, you can use this credit in addition to the CTC, ACTC, or ODC.
