The Ins and Outs of the Child Tax Credit

Raising children is one of life’s greatest joys, but it also comes with a hefty price tag. Between diapers, daycare, school supplies, and everyday living expenses, parents often find themselves stretched financially. Thankfully, the U.S. government provides a little relief through the Child Tax Credit (CTC)—a tax benefit designed to help families offset the cost of raising children. But understanding exactly how it works can be tricky. Here’s a breakdown of the ins and outs of the Child Tax Credit.

What Is the Child Tax Credit?

The Child Tax Credit is a federal tax credit available to taxpayers with dependent children under the age of 17. It’s intended to reduce a family’s tax bill or even provide a refund, depending on income level and other eligibility requirements. The credit has been a key part of tax policy for decades but has undergone several changes in recent years, especially in response to economic pressures and the COVID-19 pandemic.

How Much Is the Credit Worth?

As of the 2024 tax year, the Child Tax Credit is worth up to $2,000 per qualifying child, with up to $1,600 of that amount refundable through the Additional Child Tax Credit (ACTC). A “refundable” credit means you can receive the money even if you owe no federal income tax. This refundability is particularly helpful to low- and middle-income families.

During the 2021 tax year, under the American Rescue Plan, the credit was temporarily expanded to $3,000 or $3,600 per child, depending on age, and made fully refundable. However, those enhancements have since expired, and the credit reverted to its pre-2021 structure for now—though debates about making expansions permanent continue in Congress.

Who Qualifies?

To qualify for the Child Tax Credit, the child must meet the following criteria:

  • Be under age 17 at the end of the tax year

  • Be your son, daughter, stepchild, foster child, sibling, or a descendant of any of these

  • Have lived with you for more than half the year

  • Not have provided more than half of their own support

  • Be claimed as a dependent on your tax return

  • Be a U.S. citizen, U.S. national, or U.S. resident alien with a valid Social Security number

Income thresholds also apply. The credit begins to phase out for individuals earning over $200,000 and married couples filing jointly with incomes over $400,000.

How Do You Claim It?

You claim the Child Tax Credit when you file your federal income tax return. The IRS typically calculates your eligibility and the amount when you complete your Form 1040 and attach Schedule 8812.

If you’re eligible for the refundable portion, it will either reduce your taxes owed or result in a refund.

Final Thoughts

The Child Tax Credit can make a meaningful difference for families, offering extra breathing room in the budget or even a nice boost come tax time. It’s important to stay up to date on any changes to the credit, as Congress periodically adjusts it. Consulting a tax professional or using reputable tax software can also help ensure you’re getting the full benefit you qualify for.

Raising kids is expensive—but understanding the Child Tax Credit can help ease some of that financial strain.