We all know how hard it is for parents to raise their children and afford all their expenses. According to the reports, it is seen that the cost of raising a child is about $200,000, and according to the needs and requirements of the child, this number can easily exceed. This is why the US government has made a lot of different programs and rules through which they help the parents in this entire process.
Among these different programs, one thing that the government started was the Child Tax Credit, more commonly called CTC. If you are someone who does not know much about this, then don't worry because this article will help you understand what Child Tax Credits is? So, let's jump right into the article.
What are Child Tax Credits?
The CTC or Child Tax Credit is basically a facility that the American government offers to taxpayers. This is a benefit that allows the government to give the parents or the guardians of the children a tax benefit if the child is under the age of 17.
According to the 2023 tax year and the policies for this year, children who are under the age of 17 are eligible to get about $2000 credit. If the parent earns up to $200000, then they are eligible to apply for this tax credit, and they will earn this credit. If the tax return is applied jointly, then if the family earns about $4000000, they can also get this benefit.
However, if the parents are able to earn more than the values mentioned above, then this benefit is phased out for their children.
How Does the Child Tax Credit Work and Why is it Different?
When people hear the word Child Tax Credit, they might think that they have to pay more taxes to the government. However, this is not at all the case, and this is why the Child Tax Credit is different. The CTC helps the taxpayers to lower their taxes on a dollar-for-dollar basis. The benefit of using this tax reduction is that it allows people to save more moment as compared to the tax deduction.
This means if you have a child and you come under the category to apply for this tax, then you will be getting and saving money instead of paying tax. Hence, this program is fantastic for people and new parents who might find it hard to support their children financially.
Who is Eligible to Apply for Child Tax Credit?
Now, another thing you must know when it comes to the Child Tax Credit is the eligibility. There are different requirements that the child and the dependent need to meet in order to qualify for the Child Tax Credit.
Following are some of the major requirements that you need to keep in mind before applying for this tax credit.
The child for whom the tax credit is being applied and the dependent both need to have a Social Security number.
- One taxpayer can claim the Child Tax Credit for any single dependent.
- The child must be under the age of 17 by the end of the tax year.
- People can apply for their child, stepchild, stepbrother, stepsister, foster child, adopted child, half-sister, half-brother, and even descendants of a family member.
- The child needs to have a history of living with you for more than half the year.
- They need to be claimed as a dependent on your taxes
- There should not be any joint return filed with the spouse, and the file for the claim should only be done for the estimated tax paid.
- The child should not have contributed to more than half of their financial support.
- Should be a US national, citizen, or even a resident alien.
FAQS:
How to Claim for the Child Tax Credit?
If you want to claim the tax credit, then you need to use Form 8812. This form is then used with the Form 1040 and then used to claim the CTC. People who are applying for this CTC must have a Social Security number; otherwise, their claim will be rejected.
What was the Expanded Amount of Child Tax Credit in 2021?
If you don't know, then in 2021, the Child Tax Credit amount was expended. As people were having a hard time finding jobs and earning money, the government increased the amount, and it went up to $3000. The good news is that if you have not claimed the 2021 CTC, then you can surely do it now. You need to file the 2021 tax return before April 18, 2025.
Other than this, if you have already filed for the Child Tax Credit but did not get the amount, then you can file for the amending of your tax return.
Can Both Parents Apply for the Same Child?
No, this is not possible. One qualifying child can only be claimed by one child. If, in any situation, both the parents apply for the tax credit and the child has lived with both of them for the same period, then the IRS will choose the dependent. The dependent for the qualifying child is then selected on the basis of higher AGI for 2023. So, whoever has higher AGI will become dependent of the child.
Conclusion:
The Child Tax Credit is a fantastic initiative that the government rated for the parents so that they can support their children and give them the best upbringing. With the help of CTC, the parents get about $2000 for each qualifying child. This means instead of giving the tax; the parents can revive this amount only if their child is under the age of 17. Other than this, other requirements need to be met for this tax credit.
Hence, we hope this article was beneficial for you in understanding what CTC is and other things related to it.
