Tax season is on and everyone is busy filing their returns and finding ways to get respite from the heavy sums that might need to be paid. As parents or caregivers of children, you might have some relaxation because of the child tax credit that the central government gives you and this is how to check if you qualify.
In 2023, the central government raised the age bar for children to 17 years but the credit limit has been lowered. The child tax credit is a federal tax benefit that is important in providing financial support for American taxpayers with children so it is essential to understand how you qualify for it. People with kids under 17 may be eligible to claim a tax credit of up to $2,000 per qualifying dependent when they file their 2022 tax returns for 2023. The refundable child tax credit amount has been set at $1500 and this is how to check if you qualify for it.
Understanding Child Tax Credit in 2023
When you file your taxes, you are required to prove to the IRS that you have an added responsibility for children. You fall under the category of people who find it tough to incur educational and other child-related expenses. If you plan to claim the credit then the CTC, i.e, the child tax credit may come in handy to you. It is a tax benefit granted to taxpayers for each qualifying dependent child, under the age of 17.
The credit amount you receive depends upon your income threshold. If your income limit crosses the ceiling you may not be eligible for a 100% credit amount. Or you may be deemed ineligible for the child tax credit.
How Can Child Tax Credit Benefit You?
The child tax credit has been considered a boon by parents and guardians with kids. Rising education fees, high inflation rates, and hefty medical expenses make it extremely difficult to bring up children. The child tax credit helps in several ways to give parents and caregivers relief.
- It helps to reduce taxpayers’ tax liabilities.
- It is designed to aid taxpayers to support their families.
- It can be used to satisfy the educational needs of the kids.
- It may be used to facilitate enhancing desired skills and pursuing hobbies.
Eligibility Criteria for Child Tax Credit
Taxpayers can claim child tax credit for the 2022 tax year when they file their tax returns in 2023. The following are checkpoints you need to clear to be eligible for Child Tax Credit.
- Age: The age limit has been set to 17. A child above the age of 17 will not be considered while granting the credit.
- Relationship: The child you’re claiming must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of those people (Example: a grandchild, niece or nephew).
- Dependent status: You must be able to properly claim the child as a dependent. The child also cannot file a joint tax return. Unless they file it to claim a refund of withheld income taxes or estimated taxes paid.
- Residency: The child you’re claiming must have lived with you for at least half the year. (Exceptions to this rule exist).
- Financial support: It is mandatory for you to provide at least 50% of the child’s expenses for the past year. In other words, if your qualified child financially supported himself/herself, or someone else took the responsibility for their finances for more than six months, they’re likely to be considered ineligible.
- Citizenship: As per the IRS, your child must be a “US citizen, US national or US resident alien” and must hold a valid Social Security Number.
- Income: There is a set income limit and parents or caregivers falling under that specific income bracket are only considered for the child tax credit. If you are claiming the credit, you should make sure that you adhere to certain income requirements. Depending on how much your income exceeds that threshold, the credit gets incrementally reduced until it is eliminated.
State Child Tax Credits
Certain states, like California, New York and Massachusetts, propose their own state-level CTCs. You can claim this while filing your state return. Visit your state’s Department of Taxation website for more details.
How to Claim Child Tax Credit
You can claim child tax credit on your Form 1040 or 1040-SR. Moreover, you will also need to fill out Schedule 8812 (“Credits for Qualifying Children and Other Dependents”). This has to be submitted along with your 1040. This schedule will help you to figure out your child’s tax credit amount. If applicable, it will tell you how much of the partial refund you may be able to claim.
Most quality tax software guides like Beem help you through claiming the child tax credit. All you need to do is answer a few simple questions. Then, let the software do the rest of the process on your behalf. If you want to make your tax filing process seamless, use Beem’s Tax Calculator to estimate your Federal and State taxes and avail maximum refunds.