Pub. 972: How the Child Tax Credit and Credit for Other Dependents Work

The Child Tax Credit (CTC) and the Credit for Other Dependents (ODC) help reduce tax liability for eligible families, offsetting the cost of raising children or supporting dependents who don’t qualify for the CTC. Understanding these credits ensures taxpayers claim the correct amount and avoid filing errors.

Tax laws have changed in recent years, affecting eligibility, phase-out thresholds, and refundability. Staying informed about current rules is essential for maximizing benefits.

Qualifying Dependent Requirements

To claim the Child Tax Credit or the Credit for Other Dependents, a taxpayer must have a qualifying dependent who meets IRS criteria, including relationship, residency, age, and financial support.

A qualifying child must be the taxpayer’s son, daughter, stepchild, foster child, sibling, or a descendant of these individuals, such as a grandchild or niece. The child must have lived with the taxpayer for more than half the year. Temporary absences for school or medical treatment do not disqualify them if their primary residence remains with the taxpayer.

For the Child Tax Credit, the dependent must be under 17 at the end of the tax year. Older dependents who are still financially reliant may qualify for the Credit for Other Dependents. Additionally, the dependent cannot provide more than half of their own financial support.

Calculation of the Child Tax Credit

The Child Tax Credit provides a dollar-for-dollar reduction in tax liability. For 2024, the maximum credit is $2,000 per child, with up to $1,600 refundable through the Additional Child Tax Credit (ACTC). The refundable portion is available to taxpayers with at least $2,500 in earned income and is calculated as 15% of earnings above this threshold.

The credit begins to phase out at $200,000 for single filers and $400,000 for married couples filing jointly. It is reduced by $50 for every $1,000 of income exceeding these limits. For example, a married couple earning $420,000 would see a $1,000 reduction in their total CTC.

Taxpayers calculate their total eligible amount based on the number of qualifying children. If their tax liability is lower than the total credit, they may qualify for the ACTC. For example, a taxpayer earning $20,000 would have $17,500 in excess income, allowing for a refundable credit of up to $1,600 per child.

Credit for Other Dependents

Taxpayers supporting dependents who don’t qualify for the Child Tax Credit may be eligible for the Credit for Other Dependents (ODC). This credit applies to individuals who rely on the taxpayer for financial support but do not meet the age or relationship requirements of the CTC.

The ODC provides a non-refundable credit of up to $500 per qualifying dependent. While it cannot generate a tax refund, it lowers overall tax liability. Dependents must be U.S. citizens, nationals, or resident aliens and have a valid taxpayer identification number, such as a Social Security number or an Individual Taxpayer Identification Number (ITIN).

This credit is often used by parents supporting college-aged children or elderly relatives. For example, parents paying for a child’s college expenses while the student earns little to no income may qualify. Similarly, taxpayers assisting elderly parents with housing, medical bills, or daily expenses may benefit. Unlike deductions that require itemization, the ODC can be claimed even when taking the standard deduction.

Phase-Out Details

Income thresholds determine how much of the Child Tax Credit and Credit for Other Dependents a taxpayer can claim before reductions begin. Taxpayers with adjusted gross income (AGI) above the specified limits will see their credits reduced incrementally.

The credit decreases by $50 for every $1,000 that AGI exceeds the threshold. Taxpayers whose income is slightly above the limit may still receive a partial credit, while those with significantly higher earnings may lose the benefit entirely. AGI includes wages, self-employment earnings, capital gains, and rental income.

Tax planning strategies, such as contributing to tax-advantaged retirement accounts or health savings accounts, can help lower AGI and preserve eligibility. Business owners may also explore timing strategies for income and deductions to manage taxable earnings effectively.

Filing Rules for 2025 and Beyond

Future tax years may bring adjustments to the Child Tax Credit and Credit for Other Dependents as temporary provisions expire. Taxpayers should monitor potential changes in credit amounts, refundability rules, and income thresholds.

One anticipated change involves the refundable portion of the Child Tax Credit. Under current law, the refundable amount is capped at $1,600 per child, but this could change depending on congressional action. Inflation adjustments may also impact phase-out thresholds. Taxpayers should stay updated on IRS guidance and legislative developments to ensure accurate filings. Keeping records of dependents’ Social Security numbers, residency documentation, and income details will help ensure compliance with evolving requirements.

Claiming Refundable Portions

The refundable portion of the Child Tax Credit provides a financial benefit, particularly for those with lower tax liabilities. Unlike non-refundable credits, which only reduce tax owed, refundable credits can generate a payment from the IRS even if no tax is due.

To claim the ACTC, taxpayers must have at least $2,500 in earned income. The refundable portion is calculated as 15% of earnings above this threshold. For example, a taxpayer earning $15,000 would have $12,500 in excess income, allowing them to claim up to $1,600 per child. Filing Form 8812, Credits for Qualifying Children and Other Dependents, ensures proper calculation and documentation of the refundable portion.

Taxpayers should review income sources and deductions to maximize eligibility, as certain adjustments, such as pre-tax retirement contributions, can influence the final credit amount.