As tax season approaches, parents across the country are gathering their documents and preparing to file their 2023 tax returns. For many families, the Child Tax Credit (CTC) provides a significant boost to their refund. But with potential changes to the credit being considered by Congress for the 2023-2025 tax years, you may be wondering if you should wait to file your return.
Additionally, if you have a child who earned income in 2023, you might be unsure if they need to file their own tax return and if they can claim their own refund. In this article, we’ll break down the eligibility requirements for the Child Tax Credit in 2024, discuss the filing requirements for children with earned and unearned income, and provide tips on how to claim the credit and maximize your refund.
Child Tax Credit Eligibility Requirements for 2024
To claim the Child Tax Credit for the 2023 tax year (the return you’ll file in 2024), your child must meet several criteria:
- Age: Your child must have been under age 17 as of December 31, 2023.
- Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (e.g., your grandchild, niece, or nephew).
- Support: Your child must not have provided more than half of their own support for the year.
- Dependent: Your child must be claimed as your dependent on your tax return.
- Citizenship: Your child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residency: In most cases, your child must have lived with you for more than half the year.
- Family Income: Your modified adjusted gross income (MAGI) must be under $200,000 ($400,000 if married filing jointly).
If your child meets all these requirements, you can claim the Child Tax Credit on your 2023 tax return when you file in 2024.
Maximum Child Tax Credit Amounts for 2024
For the 2023 tax year, the Child Tax Credit provides a maximum of $2,000 per qualifying child under age 17. However, only a portion of this credit is refundable as the Additional Child Tax Credit. For 2023, the refundable portion is limited to $1,600 per qualifying child.
It’s important to note that these amounts are lower than the expanded Child Tax Credit that was available for the 2021 tax year under the American Rescue Plan Act. For 2021, the credit was increased to $3,600 for children under 6 and $3,000 for children ages 6-17. However, this expansion was temporary and has now expired.
Congress is currently considering legislation that would expand the Child Tax Credit for the 2023-2025 tax years, but as of early March 2024, this bill has not yet passed. The IRS advises taxpayers not to wait for this potential legislation and to file their 2023 tax returns as normal. If a bill expanding the credit is later passed, the IRS will automatically adjust returns and issue additional refunds for those who qualify.
Filing Requirements for Children with Earned and Unearned Income
In addition to the Child Tax Credit that parents can claim, your child may need to file their own tax return if they had earned or unearned income in 2023. Here are the filing requirements to be aware of:
Earned Income Only
If your child only had earned income from a job in 2023, they typically must file a tax return if:
- Their earned income was more than $13,850 (the standard deduction for single dependents in 2023)
So if your child is 15 and earned $5,000 from a part-time job, they would not be required to file a tax return, since their income is below the $13,850 threshold. However, they may still want to file to get a refund of any income tax withheld from their paychecks.
Unearned Income
The rules are different if your child had unearned income from sources like interest, dividends, or capital gains. In this case, your child typically must file a tax return if:
- Their unearned income was over $1,250 in 2023
- They had any earned income and their gross income (earned + unearned) was more than the larger of:
- $1,250, or
- Their earned income (up to $13,850) plus $400
If your child is required to file a return due to their unearned income, you have the option as the parent to report that income on your own tax return instead, as long as it was less than $11,500. You would do this by filing Form 8814 with your tax return. This may result in a higher tax bill than if your child files their own return, so consider the tax implications before making this election.
How to Claim the Child Tax Credit
To claim the Child Tax Credit for your qualifying children, you’ll need to:
- File your tax return (Form 1040) for 2023
- Provide each child’s name, Social Security Number, and relationship to you on your return
- Attach Schedule 8812 to calculate your Child Tax Credit and Additional Child Tax Credit amounts
If you’re eligible for the refundable Additional Child Tax Credit, this will be included with your refund after you file. If you’re not eligible for the refundable credit, the Child Tax Credit can still reduce or eliminate your tax bill.
What to Do if You’re Eligible for an Expanded Child Tax Credit
As mentioned, Congress is considering legislation to expand the Child Tax Credit for the 2023-2025 tax years, similar to the expansion that was in place for 2021. While it’s still uncertain whether this legislation will pass, the IRS has advised taxpayers not to wait to file their 2023 returns.
If you’re eligible for an expanded Child Tax Credit and a bill passes after you’ve already filed your return, the IRS says it will automatically adjust your return and issue any additional refund you’re owed. You won’t need to take any extra steps like filing an amended return. The IRS says these adjustments and payments would be a top priority and could be issued within about 6 weeks of the legislation passing.
Conclusion
The Child Tax Credit and credit for other dependents can provide significant tax savings for families. By understanding the eligibility rules, maximum credit amounts, and how to claim the credits, you can ensure you’re getting the full benefit you’re entitled to.
Remember, even if your child has their own earned or unearned income, you may still be able to claim them as a dependent and get the Child Tax Credit if they meet all the requirements. And if your child does need to file their own return, they may be able to get a refund of taxes withheld.
Most importantly, don’t wait to file your 2023 tax return just because of the potential for an expanded Child Tax Credit. File as soon as you’re ready, and trust that the IRS will adjust your return and get you any additional refund later if a bill is passed. By filing early, you can get your refund as quickly as possible and avoid any processing delays.
For more information, see the IRS Child Tax Credit page or consult a qualified tax professional.