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Can you take advantage of the child tax credit 2023?

Highlights:

- The child tax credit 2023 is designed to help parents save some money on their taxes.

- With the pandemic-era stimulus packages over, there are many changes to this popular tax credit for 2023.

- You may be able to take advantage of other tax breaks for parents like the child and dependent care credit, which helps you pay for childcare.

Having kids is rewarding for so many reasons. This time of year we get to add another one to the list — helping make that federal tax return a little more friendly. If you’re not excited about filing taxes, we get it. But it's nice to know the Internal Revenue Service (IRS) wants to give parents a little added financial support with the child tax credit 2023. 

While this tax benefit isn’t new, the rules and value have changed a bit this year. We want to make sure you know all the important details, like who qualifies and how much this income tax break can pay you back. 

Let’s dig in!

What is the child tax credit 2023?

The 2023 child tax credit (CTC) — not to be confused with the child and dependent care credit that we’ll discuss later — is a tax benefit meant to offset the costs of raising a child. 

This tax credit can be claimed for any child who was under your care during the 2022 tax year and meets all the eligibility requirements we’ll discuss below. It’s even possible in some cases to claim this credit if you aren’t normally an income tax filer. Consult a tax professional to see if this applies to you. 

A few things have changed about the child tax credit this year, so let’s take a look at those differences. 

How does it differ from last year?

Due to the extraordinary circumstances brought on by the global pandemic, the U.S. government passed the American Rescue Plan to stimulate the economy in 2021. 

This came with many temporary tax benefits including:

  • Additional child tax credit, which substantially increased the normal child tax credit

  • Expanded the age of eligible children to include 17-year-olds

  • Child tax credit payments sent out monthly as advanced payments to get it in the hands of families in need before tax season

These programs have been phasing out over the past few years, and this year they are all gone. We’re back to pre-pandemic tax rules and benefit amounts. 

Who is eligible to receive the child tax credit 2023?

Mother and daughter at a park

To be eligible to receive the full amount of the child tax credit 2023, you must have a modified adjusted gross income of less than $200,000 if your filing status is head of household. This is doubled to $400,000 if you're married and filing jointly. In addition, the child must meet the definition of a qualifying child.

A qualifying child, as the Internal Revenue Service defines the term, must meet the following qualifications:

  • They can’t be older than 16 at the end of 2022.

  • They should be your biological child, stepchild, foster child, sibling, stepsibling, half-sibling, or a descendent of one of these — meaning they could be a grandchild, etc. 

  • You must’ve covered at least half of their financial support in 2022.

  • They must have lived with you for more than half of 2022.

  • You have to claim them as a dependent on your tax return.

  • They can’t be married and filing jointly with a spouse.

  • They need to be a U.S. citizen, a U.S. national, or a U.S resident alien.

  • They must have a Social Security number that would allow them valid employment in the U.S. 

If you don’t meet all of these qualifications, talk to a tax professional to find out if you could qualify for a partial credit. 

How much is the child tax credit 2023?

For the 2023 tax season, the full credit amount is $2,000 per child ages 16 and under. If your modified adjusted gross income is $200,000 filing as head of household (or $400,000 if married and filing jointly), you may be eligible for a partial credit on your income tax return. A qualified tax professional can help you figure out how much you’re eligible to claim. 

Are there any other tax credits parents should know about?

If you’re looking for even more ways to keep some money in your account or step up your college savings plan, there are a few other tax credits that may help you.

The child and dependent care credit (CDCC) is another tax break to help out parents and guardians. The purpose of this tax credit is to help pay for childcare services or the care of other dependents so you are able to work, look for work, or go to school. 

Usually to collect this credit, the child must be under 13 years old. However, this age limit can be removed if the child or dependent you are claiming it for is unable to care for themselves. 

Unlike the child tax credit, which isn’t attached to any particular child care expense, the CDCC requires that you spent money for care so that you could work. The benefit is calculated as a percentage of your wages that you paid out for care in order to make those wages. This means you need to keep good records of all the expenses you incurred to get outside care for your kids or dependents. 

For this credit, you must have lived in the U.S. for at least six months in 2022, but there are some military exceptions to this if you or your spouse were stationed overseas. 

Due to the fact that many people stayed home with their dependents during 2020 and 2021, certain tax benefits from prior years could possibly be carried over and added to 2022. Check with a tax professional to find out how this might affect you. 

Finally, there’s the Earned Income Tax Credit (EITC). This is a tax credit designed to help out low- to middle-income workers and families making under $59,187 in wages. While this credit isn’t specifically related to having kids, it's much more likely for you to qualify for this added tax benefit if you do have qualifying kids in your household. 

How do I file for the child tax credit 2023?

To take advantage of these tax benefits and many others, you have several options. You could manually file your income taxes yourself using the resources found at www.irs.gov

If your taxes are a bit complicated, many people find that using tax software or a tax preparation service can streamline the process. Not only can professional services make filing easier, but they search any tax breaks like these that you may not know to look for. 

Depending on your situation, found tax breaks could offset the cost of professional tax services or possibly even save you money overall. Ultimately, you have to decide which method is right for you. 

The child tax credit 2023 helps you keep a little more money in your bank account

Father talking to his son

No matter if you normally owe taxes or get back a tax refund, the IRS’ child tax credit 2023 helps taxpayers with kids pay a little less. Combined with the child and cependent care credit and the Earned Income Tax Credit, it's possible you could save a pretty nice stack this year on your taxes. 

Greenlight can help your family put those savings to good use and teach your kids important money lessons about saving, budgeting, and investing. We are on a mission to offer you the best tools to help your kids get excited about beginning their personal finance journey. 

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