What are the requirements for families applying for the Child Tax Credit?

The Child Tax Credit has gone through several changes since its inception in 1997. Back then eligible taxpayers could only claim $400 per eligible child. The credit was seen as a way to help fight childhood poverty, but the restrictions for claiming the credit saw those it was intended for rarely have access to it.

That radically changed in 2021 when the American Rescue Plan (ARP) supercharged the credit, more than doubling the refundable amount for certain children. In fact the whole credit was fully refundable, which meant that even those with no earned income were eligible.

Unfortunately for many families those changes expired when Congress failed to pass an extension of the one-year experiment that is credited with having slashed poverty for its brief tenure. So what does the Child Tax Credit look like today?

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How much is the Child Tax Credit in 2024?

The amount of the credit is smaller, and eligibility is more restricted than in 2021, because of the rules established through the 2017 Tax Cuts and Jobs Act (TCJA). These changes will be in effect through the 2025 fiscal year if Congress does not modify the credit before then.

In 2021, the ARP made big changes to the credit for one year that helped many families by allowing them to receive half of the value of the credit over six months rather than as a lump sum when they file their taxes. The remaining half of the credit was then claimed when filing their tax return, if households didn’t opt out of the payment scheme. Those that chose to forgo the monthly payments collected the full $3,000 or $3,600, if they were eligible.

Families which didn’t receive the 2021 CTC that are eligible may still be able to claim it.

Taxpayers with eligible children in 2023 can claim a credit worth up to $2,000 per child. This year the credit is partially refundable, and there is an earnings threshold to start claiming the up to $1,600 portion known as the “Additional Child Tax Credit.”

Taxpayers who owe less in taxes than the refundable amount will have it added to their tax refund, and the non-refundable portion will reduce taxes owed dollar-for-dollar. To claim a refund, filers must complete Schedule 8812.

What children are eligible for the 2023 Child Tax Credit?

The 2023 Child Tax Credit is available to parents with dependents under 17 as of 31 December 2023 and who meet certain eligibility requirements. Under the enhanced credit, children aged 17 were eligible for the full amount of the much larger 2021 Child Tax Credit.

The child must be eligible to be claimed as a dependent on the taxpayer’s return and live at the same residence as the taxpayer for more than half the year. The child cannot provide more than half of their own financial support during the tax year.

The child must have a valid taxpayer identification number in the form of a work-authorized Social Security number (SSN). Before the TCJA and under the 2021 souped-up version, taxpayers could claim children with individual taxpayer identification numbers (ITIN) issued by the IRS, not the Social Security Administration. This meant that documented immigrants and permanent residents were able to claim the credit as well.

Taxpayer income requirements to claim the 2023 Child Tax Credit

Parents of eligible children must have an adjusted gross income (AGI) of less than $200,000 for single filers and $400,000 for married filing jointly to claim the full credit. For every $1,000, or fraction thereof, over those thresholds, the credit is reduced by $50.

For lower-income Americans, they must have an income of at least $2,500 to be eligible for the refundable portion of the credit. The amount that can be claimed is a portion of earnings above that threshold. To calculate how much can be claimed, you need to subtract $2,500 from your “earned income”, for example, Social Security benefits and unemployment compensation do not count, and then multiply that number by 15 percent.