Those anticipating to add a newborn baby born in 2023 to their 2022 income tax return and claim the child tax credit will need to exercise patience and wait until the following year’s filing to benefit from the considerable financial advantage. The Child Tax Credit (CTC) is a significant federal tax benefit designed to provide substantial financial assistance to American taxpayers who have dependent children.
Eligible taxpayers with children under the age of 17 can claim a credit of up to $2,000 on their tax return. However, it’s essential to understand that when filing your taxes, you can only report information relevant to that specific tax year. For instance, while filing your 2022 individual income tax return, you can only include income, children, marriage, and other relevant information pertaining to 2022.
Eligibility Criteria for the Child Tax Credit: IRS Guidelines and Requirements
If you have been blessed with a child born this year (2023), you will need to exercise patience and wait until 2024 to take advantage of the Child Tax Credit when filing your 2023 tax return. Nonetheless, it’s crucial to familiarize yourself with the criteria and qualifications required by the Internal Revenue Service (IRS) to claim the CTC, especially if your 2023 income tax filing will be the first year you include a dependent and claim the credit. This knowledge will prepare you for the credit’s benefits in the future.
As per the IRS guidelines, you are eligible to claim the Child Tax Credit (CTC) for any qualifying child who possesses a valid Social Security number. When preparing to file your 2023 taxes, keep in mind the requirements to qualify for the full Child Tax Credit amount. Each dependent must:
- Be under the age of 17 by the end of the tax year.
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of these (such as a grandchild, niece, or nephew).
- Not provide more than half of their own financial support during the year.
- Have lived with you for over half of the tax year.
- Be properly claimed as your dependent on your tax return.
- Not file a joint return with their spouse for the tax year, or if they do file jointly, it should be solely to claim a refund of withheld income tax or estimated tax paid.
- Hold U.S. citizenship, be a U.S. national, or be a U.S. resident alien.
Income Thresholds and Claiming the Child Tax Credit
Furthermore, besides meeting the eligibility criteria mentioned above, the Child Tax Credit is also dependent on earned income. The IRS has established an income threshold lower limit of $200,000 for individual and other filing statuses, and $400,000 for those filing jointly, to qualify for the Child Tax Credit.
Parents and guardians with higher incomes may still qualify for a partial Child Tax Credit. The credit amount is gradually reduced or phased out by $50 for every $1,000 of income exceeding the income threshold. Once the income reaches $240,000 for individual filers and other filing statuses, or $480,000 for those filing jointly, no credit can be claimed.
In case your Child Tax Credit exceeds the total amount of income taxes you owe, and you had earned income of at least $2,500, the CTC becomes partially refundable. For the 2022 tax year (taxes filed in 2023), the refundable portion can be up to $1,500 for each qualifying child. However, for the 2023 tax year (taxes filed in 2024), the maximum child tax credit will remain $2,000 per qualifying dependent, but the partially refundable amount will increase to $1,600, as per the IRS guidelines.
In order to claim the Child Tax Credit (CTC), it is essential to include eligible children and dependents on your U.S. Individual Income Tax Return Form 1040. Additionally, you must attach a fully completed Schedule 8812 (Credits for Qualifying Children and Other Dependents) to your tax return.