How Much Do You Get in Taxes for a Child?

Tax benefits for families can significantly impact financial planning, particularly the Child Tax Credit. This credit is a key component of tax relief for parents, offering savings to help offset the costs of raising children.

Child Tax Credit Overview

The Child Tax Credit (CTC) is a federal tax benefit aimed at reducing families’ tax liability. Established under the Internal Revenue Code, the CTC has evolved over time to address changing economic conditions and policy priorities. In 2024, the credit remains a valuable resource for families, providing financial relief and supporting child-rearing.

Taxpayers can claim the credit for each qualifying child under 17. The maximum credit per child is $2,000, a figure unchanged since the Tax Cuts and Jobs Act of 2017. This credit is partially refundable, meaning taxpayers may receive a refund even if their tax liability is reduced to zero.

While temporary enhancements to the CTC under the American Rescue Plan Act of 2021 have expired, discussions about future adjustments continue. However, no legislative changes have been enacted for 2024.

Eligibility Criteria for Child Tax Credit

To claim the CTC in 2024, taxpayers must meet specific criteria. The child must be a dependent under 17 by the end of the tax year and satisfy the relationship test, covering children, stepchildren, foster children, siblings, or their descendants. The residency test requires the child to have lived with the taxpayer for more than half the year. Additionally, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

Income thresholds determine eligibility for the full credit. In 2024, the credit begins to phase out for taxpayers with adjusted gross income (AGI) over $200,000 for single filers and $400,000 for joint filers. The credit decreases by $50 for every $1,000 of income above these thresholds.

Calculating the Child Tax Credit Amount

The maximum CTC for 2024 is $2,000 per qualifying child. However, the amount a taxpayer can claim depends on their AGI, filing status, and the number of qualifying children. Once AGI surpasses $200,000 for individuals or $400,000 for joint filers, the credit is reduced by $50 for every $1,000 over the threshold. For example, a taxpayer with an AGI of $210,000 filing singly would see a $500 reduction, resulting in a credit of $1,500 per child.

The refundable portion of the credit, known as the Additional Child Tax Credit (ACTC), provides financial support to taxpayers even if their tax liability is reduced to zero. The ACTC is calculated as 15% of earned income above $2,500, up to a maximum refundable amount of $1,500 per child, benefiting families with lower income.

Impact of Income on Child Tax Credit

Income plays a critical role in determining the CTC amount. The phase-out mechanism reduces the credit for higher-income taxpayers, targeting benefits toward middle- and lower-income families. Taxpayers near the phase-out thresholds may need to plan strategically, such as by adjusting income reporting or timing deductions, to retain eligibility for the full credit.

Additional Child Tax Credit

For families with little or no federal income tax liability, the ACTC offers a refundable portion of the CTC. This ensures that even taxpayers who owe no federal income tax can still receive financial support. The ACTC is particularly beneficial for low-income households.

In 2024, taxpayers can claim up to $1,500 per qualifying child as a refundable credit. The calculation is based on earned income exceeding $2,500, with 15% of that excess amount being refundable, up to the $1,500 limit. For example, a taxpayer earning $20,000 in 2024 would calculate their ACTC as 15% of $17,500 (the amount exceeding $2,500), resulting in a refundable credit of $1,500 per child.

Taxpayers should also consider how the ACTC interacts with other credits, such as the Earned Income Tax Credit (EITC). Coordinating these credits can maximize refunds, as the ACTC is based on earned income while the EITC has its own income thresholds.

Changes in Child Tax Credit for 2024

The CTC has remained largely consistent in 2024, with the maximum credit per child set at $2,000. While there have been discussions about potential changes, including increasing the refundable portion of the ACTC or expanding eligibility to dependents aged 17, no new legislation has been enacted.

Another debated proposal involves indexing the CTC to inflation, which would preserve its real value over time. Currently, the credit amount is fixed, meaning its purchasing power diminishes as inflation rises. Families should monitor developments, as changes could impact future tax planning.

Filing for Child Tax Credit

Claiming the CTC requires careful attention during tax filing. Taxpayers must use IRS Form 1040 or 1040-SR and complete Schedule 8812 to calculate both the CTC and the refundable ACTC. Accurate documentation, including the Social Security Number (SSN) of each qualifying child, is essential. Supporting records like birth certificates, school records, or proof of residency should also be retained in case of an audit.

Filing early can help expedite refunds, particularly for those claiming the ACTC. Early filing also reduces the risk of identity theft and provides time to arrange payment plans if taxes are owed.