The IRS Child Tax Credit is a tax credit available to parents and guardians of dependent children under the age of 17. This credit can reduce your taxes by up to $2,000 per qualifying child, depending on your income.
Who Qualifies for the Child Tax Credit?
In order to qualify for the Child Tax Credit, you must be claiming a dependent child under the age of 17 as of December 31st of the year in which you’re filing your taxes. You also need to meet certain income criteria and be able to provide proof that you are eligible for a Social Security Number (SSN) or an Adoption Taxpayer Identification Number (ATIN) for each qualifying child. Additionally, if your income exceeds a certain level, then you may not qualify for the full amount of the credit.
How Much Is the Child Tax Credit Worth?
The amount of your credit depends on several factors, including your adjusted gross income (AGI), filing status, and number of qualifying dependents, among other things. For 2022 returns filed in 2023, taxpayers with an AGI below $200K for single filers ($400k for joint filers) receive up to $2,000 per qualifying dependent in addition to any other credits they were eligible for. For taxpayers with an AGI above $200K the tax credit begins to phase out as income grows.
Difference Between Child Tax Credit and Dependent Exemption
The Child Tax Credit should not be confused with the dependent exemption. The dependent exemption is a deduction applied to your taxable income while the Child Tax Credit is a credit that reduces your tax liability. In 2017, Congress replaced the dependent exemption with the new “qualifying child” tax credit.
Which Parent Gets to Use the Child Tax Credit?
Generally speaking, if the parents are not filing a joint return, the parent who claims the child as a dependent on their tax return will receive the credit. This is typically the parent with whom the child resides for more than half of the year and provides at least 50% of their support. However, if the parents have a custody or divorce order, they must follow the orders of the Court.
Burnham Law has assisted many clients in the determination of who claims their child(ren) for tax purposes. If you need assistance determining what credits apply to you or have questions about filing correctly, please reach out to Burnham Law today.