The Child Tax Credit (CTC) is a federal tax benefit that reduces the amount of income tax owed by parents and caregivers for each qualifying child in their household. For many families, it is one of the largest single tax benefits they receive each year. Understanding how it works, who qualifies, and how to claim it correctly ensures you are not leaving money on the table.
How much the credit is worth
For the 2023 tax year, the Child Tax Credit is worth up to $2,000 per qualifying child under the age of 17. Up to $1,600 of this amount is refundable through the Additional Child Tax Credit (ACTC), meaning families whose tax liability is lower than the credit amount can receive the difference as a refund rather than simply reducing their tax bill to zero. The credit begins to phase out at $200,000 of adjusted gross income for single filers and $400,000 for married couples filing jointly.
What makes a child a qualifying child
To qualify, a child must be under 17 at the end of the tax year, must have a valid Social Security number, must be your son, daughter, stepchild, eligible foster child, sibling, or a descendant of any of these, and must have lived with you for more than half the year. The child must not have provided more than half of their own financial support during the year, and they cannot file a joint tax return with a spouse. Most children in a household that would naturally think to claim the credit meet these requirements.
The additional child tax credit for lower-income families
The refundable portion of the credit, called the Additional Child Tax Credit, is particularly important for families with lower tax liability. If the regular Child Tax Credit reduces your tax bill to zero with credit left over, you may be able to receive up to $1,600 per child as an actual refund. This makes the credit valuable even for families who owe little or no federal income tax. To claim it, you file Schedule 8812 with your tax return.
How to claim it
The Child Tax Credit is claimed on your federal income tax return. Most tax software programs calculate it automatically when you enter information about your dependents. If you use a tax preparer, make sure to provide accurate information about each child in your household including their Social Security numbers and the number of months they lived with you during the year. Errors in dependent information are a common reason families receive less than the full credit.
What changed from previous years
The Child Tax Credit has changed significantly in recent years. The temporary 2021 expansion that raised the credit to $3,600 per child and made it fully refundable expired at the end of 2021, returning to the current $2,000 level. Congress has periodically discussed expanding the credit again, and it is worth checking current IRS guidance or a tax professional for any changes that may have taken effect for the most recent tax year, as legislative changes to this credit happen more frequently than most tax provisions.