If you have children under the age of 17, you likely qualify for the child tax credit in 2023. Raising children is expensive and this credit is designed to help offset some of those costs. The child tax credit for 2023 is $2,000 per qualifying child. We will cover 10 things you need to know about the child tax credit, including who qualifies, how to claim, and how much you may be eligible for.
What is the Child Tax Credit?
The child tax credit is a tax credit that is available to taxpayers with dependent children under the age of 17. It is also commonly referred to as the CTC. You have to prove to the IRS that you and your child meet specific criteria to claim the tax credit. You will also need to show that your Modified Adjusted Gross Income (MAGI) is under a certain threshold. If it is above, then you may still be eligible for a reduced amount.
Here are 10 things to know about the Child Tax Credit for 2023.
1. Are we getting a Child Tax Credit in 2023?
Yes, there is a child tax credit in 2023. However, to qualify, you must meet the eligibility factors and your annual income must not exceed $200,000 for single filers, or over $400,000 if you file married filing jointly. If your income exceeds this, you may still be eligible to claim a partial tax credit.
2. How much can you get?
$2,000 for each qualifying dependent child.
Remember, this is a child tax credit for each qualifying child. If you have two eligible children, you get twice the amount.
3. Is the child tax credit refundable in 2023?
The child tax credit in 2023 is nonrefundable. This means that if your tax liability exceeds what you get from the credit, you will forfeit the difference.
However, you may still be able to claim the additional child tax credit. This refunds each child up to $1,500 depending on your income, and you must have earned income of at least $2,500 to be even eligible for a refund. Make sure that you fill out IRS Form 8812 to see if you are eligible.
4. Who is eligible?
Taxpayers who are eligible for the child tax credit generally need to meet all of the below criteria.
- Relationship: The child you are claiming must be related to you. This includes your own child, an adopted child, a stepchild, a foster child, a brother or sister, a stepbrother, or a stepsister. You can also claim descendants of these qualifying people such as your nieces, nephews, or grandchild if they meet the other criteria below.
- Dependent status: You must be able to properly claim the child as a dependent on your tax return.
- Residency: The child must have lived with you for at least half the year. There are some exceptions to this rule.
– A child born or died during the tax year is considered to have lived with you for the entire year.
– Temporary absences for special circumstances are counted as the time that the child lived with you. Some of these circumstances include school, vacation, business, medical care, military service, or detention.
– There are some other exceptions for children of divorced or separated parents.
- Financial support: You must have provided at least half of the child’s support during the last year.
- Citizenship: The child needs to have a social security number, and must be a U.S. citizen, national or resident alien.
- Income: To receive the full child tax credit for 2023, your modified adjusted gross income needs to be equal to or below $400,000 for married filing jointly or $200,000 for all other filers. If your income exceeds these amounts, your credit amount is reduced by $50 for each additional $1,000 in income.
5. How many kids can I get a tax credit for?
You can claim up to $2,000 for each qualifying kid under 17.
6. How do I claim the CTC?
You can claim the child tax credit on your Form 1040 or 1040-SR. You will also need to submit a Schedule 8812 (Credits for Qualifying Children and Other Dependents”). This schedule will help you figure out your child tax credit amount.
7. Is the tax credit for 2023 smaller than the tax credit in 2022?
The Child Tax Credit for 2022 and 2023 is $2,000.
8. When will you get the CTC money?
It typically takes 21 days or less for the IRS to issue a refund to taxpayers who filed electronically and chose to receive their refund via direct deposit. If there are any errors, then it could take longer to process. There are also staffing shortages which are causing tax returns to be delayed.
9. Is the child tax credit the same as the child and dependent care credit?
No. The child and dependent care credit is another type of tax benefit for taxpayers with children. It covers a percentage of expenses you made for care so that you can work or look for work. You can claim a credit for 20% to 35% of qualified care expenses for the 2023 tax year depending on your income level. The CDCTC is non-refundable.
Qualifying factors for the child and dependent care credit include:
– Children who are 12 or younger at the end of the tax year
– Dependent adult family members or spouses who are not able to care for themselves due to mental or physical impairments. However, the dependent family member or spouse cannot have a gross income of more than $4,300.
To claim the CDCTC, you need to fill out Form 2441.
10.What is the 2024 child tax credit?
On March 9, 2023, the Biden administration released their budget plan for the 2024 fiscal year. If approved, the Budget would expand the credit from $2,000 per child to $3,000 per child for children six years old and above, and to $3,600 per child for children under six. This would also be refundable.
What are other ways that you can save on taxes while raising children?
Here are some additional ways that you can save on taxes while raising children:
- Child and Dependent Care Credit: This federal tax benefit helps families pay expenses for child care needed to work or to look for work. If you qualify, you can claim up to $3,000 for one dependent, or up to $6,000 for more than one dependent, with the Child and Dependent Care Tax Credit. The maximum credit is 35% of your employment-related expenses.
- Filing Status: You may qualify for a higher standard deduction and lower tax rates if you are filing as head of household and you are unmarried and your child lived with you for more than half of the year.
- Adoption Tax Credit: You may qualify for the adoption tax credit if you adopted a child or are in the process of adopting a child.
- Credits and Deductions: Your child may have different education credits or deductions if enrolled in a qualifying school program.
Speak to a financial advisor about the child tax credit
The child tax credit is intended to help offset some of the expenses that come from raising a family. If you’d like expert guidance on how the child tax credit of 2023 might apply to your household, or you’re interested in lowering your taxes and helping pay for your child’s college education, feel free to join our waitlist for a free 30-minute discovery call with one of District Capital’s personal financial planners.
Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help professionals in their 30s and 40s achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.