What Is IRC 24 and How Does It Apply to the Child Tax Credit?

The Internal Revenue Code (IRC) Section 24 is a key part of the U.S. tax system, focusing on the Child Tax Credit. This credit reduces federal income tax for taxpayers raising children, providing financial relief.

Understanding how IRC Section 24 applies to the Child Tax Credit helps taxpayers optimize their benefits. By examining dependent requirements, filing status, and other factors, individuals can navigate the credit’s complexities and improve their tax outcomes.

Dependent Requirements

To qualify for the Child Tax Credit, dependents must meet specific criteria. A qualifying child must satisfy tests for age, relationship, residency, and support. For the 2024 tax year, the child must be under 17 at the end of the year. The relationship test requires the child to be the taxpayer’s son, daughter, stepchild, foster child, sibling, step-sibling, or a descendant of these relatives. The residency test mandates that the child must have lived with the taxpayer for more than half of the year. Additionally, the child cannot provide more than half of their own financial support during the tax year and must be a U.S. citizen, U.S. national, or resident alien.

Filing Status Considerations

Filing status significantly affects the amount of Child Tax Credit a taxpayer can claim. The main statuses include single, married filing jointly, married filing separately, head of household, and qualifying widow(er). These statuses determine the credit’s phaseout thresholds. For 2024, married couples filing jointly have a phaseout starting at $400,000, while for single filers and heads of household, it begins at $200,000.

Filing as head of household can also offer additional tax benefits, such as a lower tax rate and a higher standard deduction. This status is available to unmarried taxpayers who pay more than half the cost of maintaining a home for a qualifying dependent, such as a child.

Phase-In and Phaseout

The Child Tax Credit adjusts based on income through phase-in and phaseout mechanisms. During the phase-in, lower-income taxpayers qualify for the credit as their earned income exceeds $2,500 in 2024. The credit amount increases proportionally with income until it reaches the maximum limit.

For higher-income taxpayers, the phaseout reduces the credit at specified income levels. In 2024, single filers with incomes above $200,000 and married couples filing jointly with incomes above $400,000 will see their credit reduced by $50 for each $1,000 of income beyond these thresholds.

Refundable Portions

The refundable portion of the Child Tax Credit, known as the Additional Child Tax Credit (ACTC), benefits taxpayers with little to no tax liability. Eligible taxpayers can receive a refund calculated as 15% of earned income above $2,500, up to the maximum refundable amount of $1,600 per qualifying child in 2024. This feature enhances the credit’s value for lower-income families.

Documentation Requirements

Proper documentation is critical when claiming the Child Tax Credit. Taxpayers must include the dependent’s Social Security Number (SSN) on their tax return. The SSN must be valid for employment and issued before the tax return’s due date, including extensions. For adopted children, an Adoption Taxpayer Identification Number (ATIN) may be used temporarily if the SSN is not yet available.

Taxpayers should also retain proof of the child’s relationship, residency, and age, such as birth certificates, school or medical records, and utility bills showing the taxpayer’s address. These records confirm the child meets the qualifying criteria. While these documents are not submitted with the return, they must be available in case of an IRS inquiry.