Who Can Claim the Child Tax Credit on Their Tax Return?

The Child Tax Credit (CTC) provides significant tax savings for eligible families, but not everyone qualifies. The IRS has specific rules based on relationship to the child, financial support, and living arrangements. Failing to meet these requirements can result in losing the credit or facing issues with your tax return.

Understanding eligibility criteria is essential to avoid errors or disputes. Key factors include dependency status, filing situation, custody agreements, and income level.

Dependent Criteria

To claim the Child Tax Credit, the child must meet the IRS definition of a qualifying dependent, which includes age, relationship, residency, financial support, and tax filing status. The child must be under 17 at the end of the tax year.

The child must also be related to the taxpayer in one of the ways recognized by the IRS, such as a biological child, stepchild, adopted child, foster child, sibling, half-sibling, or certain descendants like grandchildren, nieces, and nephews. More distant relatives or unrelated children do not qualify, even if they live with the taxpayer.

Residency is another requirement. The child must have lived with the taxpayer for more than half the year, or at least 183 days. Temporary absences for school, medical care, or military service do not count against this requirement. If a child splits time between multiple households, only one taxpayer can claim them.

The child cannot provide more than half of their own financial support during the year. This includes wages, investments, or other income. The taxpayer claiming the credit must be the primary provider of support, covering housing, food, clothing, medical care, and education.

Filing Status

A taxpayer’s filing status affects eligibility for the Child Tax Credit. The IRS recognizes five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse.

Head of Household status often provides the most favorable tax treatment for single parents. To qualify, the filer must be unmarried or considered unmarried on the last day of the tax year and must have paid more than half the cost of maintaining a home for themselves and a qualifying child. This status offers a higher standard deduction and generally results in lower tax liability.

Married taxpayers filing jointly can claim the credit if they meet the income and dependent requirements. Filing jointly often leads to a lower overall tax rate and a higher credit phase-out threshold. Those filing as Married Filing Separately may face restrictions. The IRS generally disallows the credit for filers using this status unless they meet specific exceptions, such as living apart from their spouse for more than half the year and qualifying under certain Head of Household rules.

Shared Custody Arrangements

When parents share custody, only one can claim the Child Tax Credit for a given child in a tax year. Typically, the parent with whom the child spends the majority of nights during the year has the right to claim the credit. However, when custody is split evenly, disputes can arise.

To resolve conflicts, the IRS applies “tiebreaker rules.” If both parents claim the same child, the credit generally goes to the parent with the higher adjusted gross income (AGI). Some separated or divorced parents choose to alternate years, allowing each to claim the child every other tax season. This arrangement should be agreed upon in advance and, in some cases, documented in a divorce decree or custody agreement.

A custodial parent can also release their claim to the credit by filing IRS Form 8332, allowing the noncustodial parent to claim it instead. This is common when one parent earns significantly more and would receive a greater tax benefit. However, this transfer only applies to the Child Tax Credit itself and does not grant eligibility for other dependent-related tax benefits, such as the Earned Income Tax Credit or Head of Household status, which remain with the custodial parent.

Income Factors

A taxpayer’s income affects eligibility for the Child Tax Credit, as the credit phases out at higher earnings. For the 2023 tax year, the full credit amount of $2,000 per qualifying child is available to single filers with a modified adjusted gross income (MAGI) of $200,000 or less, while married couples filing jointly must remain at or below $400,000. Once income exceeds these thresholds, the credit is reduced by $50 for every $1,000 over the limit, gradually eliminating the benefit for higher earners.

For lower-income taxpayers, a portion of the credit may be refundable through the Additional Child Tax Credit (ACTC). If the credit exceeds tax liability, up to $1,600 per child can be refunded for 2023, provided the taxpayer has at least $2,500 in earned income. The refundable portion follows a formula: 15% of earned income above $2,500, up to the $1,600 cap per child. This feature helps offset payroll taxes and provides relief for families with little to no income tax liability.