Important updates to the 2024 Child Tax Credit

The Child Tax Credit (CTC) can help families with the costs of raising children. But some changes to the code circulating through Congress might affect your benefit. If you’re working on your 2023 taxes, you’ll need to follow the Child Tax Credit 2023 guidelines. But some changes to the Child Tax Credit in 2024 may retroactively affect your 2023 return, too. Here’s what you need to know.

What is the Child Tax Credit? 

The Child Tax Credit offers a nonrefundable* tax break for each child in a qualifying household - even if you don’t file a tax return. If you qualify, it reduces the amount of taxes owed and can even result in a refund if the credit exceeds what you owe. This benefit has been around for years, but some important updates are coming in 2024 that you need to know about.

* Though the CTC is nonrefundable overall, some households qualify for a refundable portion, known as the Additional Child Tax Credit (ACTC). 

What's changing? Child Tax Credit 2024

Currently, the CTC allows up to $2,000 per child. The refundable portion of that (ACTC) maxes at $1,600 per child under current law. But if the proposed bill passes, it will increase those numbers as follows:

1. The $2,000 per child credit would index for inflation, rounded to the nearest $100, for the 2024 and 2025 tax years. This means that even if you filed already for 2023, you may be eligible for retroactive credit. 

2. The maximum refundable amount per child would increase to $1,800 for the 2023 tax year, $1,900 for the 2024 tax year, and $2,000 for the 2025 tax year.

But that's not all - another important change is that families can choose whether to use their current tax year earnings or earnings from the prior year. This essentially expands the income threshold for some families whose income is inconsistent year-to-year or was significantly lower one year. 

All of the above changes would affect tax years 2023 through 2025.

Who qualifies? 

The Child Tax Credit is available to families with dependent children under the age of 17 at the end of 2023, as long as they meet certain income requirements. 

Income-wise, you may qualify if you’re married and filing jointly with an adjusted gross income under $400,000 or under $200,000 for individual filers. 

How do I claim the 2024 Child Tax Credit?

To claim the Child Tax Credit, you must determine your eligibility, file your taxes (if required), and provide the required information about your children and household on your tax return.

You can also claim the Child Tax Credit without a 2023 or 2024 tax return. If you filed tax returns in the last few years or received a stimulus check from the IRS, you might already be “signed up” to receive the credit automatically. You can always check or sign up here.

It might seem like a chore, but getting to grips with the Child Tax Credit can really pay off. Let's explore why it's worth your time.

Frequently asked questions about the Child Tax Credit in 2024

Q: Who is eligible for the Child Tax Credit 2024?

A: Households with dependent children under the age of 17 who fit the annual earnings and other eligibility criteria.

Q: How much is the Child Tax Credit worth in 2024?

A: The maximum amount for each qualifying child is $2,000 for eligible children.

Q: Will there be any additional benefits for parents in 2024?

A: If new legislation passes, the maximum Child Tax Credit may change according to inflation, and the refundable portion of the credit may increase for tax years 2023 through 2025. It also means that even if you owe no taxes, you may still be eligible to receive your full credit amount.

Q: When will the increased Child Tax Credit take effect?

A: If passed, the increase in the Child Tax Credit will take effect starting in 2024.

Q: How do I know if I qualify for the Child Tax Credit?

A: You must have at least one qualifying child under the age of 17 and meet income and other eligibility requirements. Check the IRS Child Tax Credit requirements here. 

Q: Is the Child Tax Credit based on my adjusted gross income (AGI)?

A: Your eligibility for the Child Tax Credit is based in part on your AGI.

Q: Can I claim the Child Tax Credit if I’m not the child’s parent?

A: In some cases, you may be eligible if you meet the caregiver requirements. Check the IRS Child Tax Credit requirements here. 

Q: How is the Child Tax Credit distributed?

A: The Child Tax Credit can be distributed as a reduction in your tax liability or as a refund if the credit exceeds your tax liability.

Q: Can I claim the Child Tax Credit if I am self-employed?

A: Yes, self-employed individuals can claim the Child Tax Credit as long as they meet other eligibility criteria.

Q: How do I apply for the advance Child Tax Credit payments?

A: Many families automatically receive Child Tax Credit payments if they’ve claimed the benefit on past taxes or if they claimed stimulus checks. You can also apply for the advance Child Tax Credit payments when you file your taxes. 

Q: What happens if my income increases in 2024?

A: If your income increases in 2024, it may affect your eligibility or the amount of Child Tax Credit you can claim.

Q: What happens if I have a new child in 2024?

A: If you have a new child in 2024, you can claim the Child Tax Credit for that child as long as you meet the other eligibility criteria.

Q: Can I claim the Child Tax Credit for a child who is not a U.S. citizen?

A: To claim the Child Tax Credit, the child must be a U.S. citizen, U.S. national, or U.S. resident alien. Confirm the IRS Child Tax Credit requirements here.

Q: Can I opt out of the advance Child Tax Credit payments?

A: Yes, you can opt-out or unenroll at the IRS Child Tax Credit Update Portal.  

If passed into law, the changes to the Child Tax Credit in 2024 are significant and could financially impact families. The increase in the credit amount, the expansion of eligibility, and the option for advance payments all aim to provide more support for parents and caregivers. However, it's important to understand these changes and how they apply to your specific situation. As always, consult with a reputable tax professional or the IRS if you have any questions or concerns.