How Much Is the CTC Bill and What Does It Cover?
Learn how the Child Tax Credit is calculated, who qualifies, and what portion is refundable to help maximize your potential tax benefits.
The Child Tax Credit (CTC) helps families manage the cost of raising children by reducing tax liability and, in some cases, providing a refund. The credit amount depends on income, number of qualifying children, and other factors.
Eligibility Factors
To qualify, a child must be under 17 at the end of the tax year and be a direct descendant, such as a son, daughter, stepchild, or eligible foster child. Siblings, half-siblings, and certain extended family members may also qualify if they meet dependency criteria.
The child must have lived with the taxpayer for more than half the year, with exceptions for temporary absences due to school, medical care, or military service. They must also be a U.S. citizen, U.S. national, or resident alien with a valid Social Security number issued before the tax return’s due date.
Financial support rules apply. The child cannot provide more than half of their own financial support and must be claimed as a dependent. If multiple individuals qualify to claim the same child, IRS tiebreaker rules apply, typically favoring the parent with whom the child lived the longest. If the child lived equally with both parents, the parent with the higher adjusted gross income (AGI) can claim the credit.
Credit Calculation
For 2024, the Child Tax Credit is worth up to $2,000 per eligible child, but the full amount depends on income, tax liability, and refundability rules.
The credit first reduces federal income tax liability. If the credit exceeds the amount owed, a portion may be refundable through the Additional Child Tax Credit (ACTC), which allows eligible taxpayers to receive up to $1,600 per child as a refund.
The refundable portion is based on earned income and phases in at 15% of earnings above $2,500. For example, a family earning $15,000 would calculate their refundable credit as ($15,000 – $2,500) × 15% = $1,875. Since this exceeds the $1,600 per-child limit, they would receive the maximum refundable amount per child. Families with lower earned income receive a smaller refund, while those with higher income may see a reduction due to phase-out thresholds.
Income Thresholds
The Child Tax Credit is subject to income limits that determine whether the credit is reduced or fully available. These limits are based on modified adjusted gross income (MAGI), which includes wages, self-employment earnings, and certain other taxable sources.
For 2024, the phase-out begins at $200,000 for single filers and $400,000 for married couples filing jointly. Once income surpasses these thresholds, the credit is reduced by $50 for every $1,000 above the limit. For example, a married couple earning $420,000 would see a $1,000 reduction in their total credit amount. The phase-out continues incrementally until the credit is fully eliminated for those with significantly higher earnings.
Families with income below the phase-out range generally qualify for the full credit. Those with very low income may not benefit from the entire credit if they lack sufficient tax liability. Tax planning strategies, such as adjusting deductions or deferring income, can sometimes help maximize the available credit.
Refundable Portion
A key feature of the Child Tax Credit is its partial refundability, which helps lower-income households that may not owe enough in federal taxes to fully utilize the non-refundable portion.
The ACTC is phased in at a rate of 15% of earned income exceeding $2,500. For example, a taxpayer earning $10,000 above this threshold would be eligible for an ACTC amounting to $1,125 ($10,000 × 15%). However, the maximum refundable amount per child is capped at $1,600 for the 2024 tax year.
Claiming the Credit
Filing for the Child Tax Credit requires accurate documentation. The credit is claimed on a taxpayer’s annual federal income tax return, typically using Form 1040 or 1040-SR. A valid Social Security number is required for each qualifying child, as the IRS does not accept Individual Taxpayer Identification Numbers (ITINs) or Adoption Taxpayer Identification Numbers (ATINs) for this credit.
Income details must be accurately reported to determine whether the credit is fully available or subject to phase-outs. Those eligible for the refundable portion must also complete Schedule 8812 to calculate the Additional Child Tax Credit. Filing electronically and opting for direct deposit can expedite refunds. Taxpayers with complex financial situations may benefit from consulting a tax professional to ensure compliance.