Child Tax Credit 2023 – What You Need To Know
Many families take advantage of tax credits and deductions when they file their annual returns. The Child Tax Credit is a popular one that could be worth up to $2,000 per qualifying dependent under 17 this year. Millions of American families took advantage of an expanded credit in 2021 that boosted the amount of money parents received for each child under six or 17-year-old. That enhancement has now expired, and the credit will revert back to its former value and rules in 2023.
Child Tax Credit 2023
The child tax credit has been a popular way for families to get help paying for their kids’ education, health care and other needs. It got a big boost last year, when it was expanded under the American Rescue Plan. While Congress did not extend the expansion for 2022, the credit is still available in 2023 if you qualify. It’s worth up to $2,000 per qualifying child, but it is only fully refundable if you don’t owe taxes. To claim the credit, you must pass a number of tests. These include age, relationship, dependent status, residency and financial support. You also must have a valid Social Security number that’s valid for employment purposes in the U.S.
The credit fades down in increments after a certain income limit is hit, so you’ll need to show that your modified adjusted gross income is below the threshold. If you exceed it, the amount of your credit will be reduced or eliminated altogether. To qualify, your child must be your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister or a descendant of one of these categories (like a grandchild or niece or nephew). They also need to have a Social Security number and have provided less than half of their own financial support in 2022. You must claim the child as a dependent on your 2022 tax return. And they must have lived with you for more than half the year that you claimed them as a dependent.
Parents can claim the full credit if they meet certain residency requirements and income limits, including having their main home in the United States for more than half the year and having children under 16 years of age on December 31. Military personnel and federal employees assigned abroad also qualify. To claim the credit, parents must file their taxes and prove they meet residency and income eligibility standards. They’ll use Schedule 8812 to figure their credit amount and include it in their tax return. The credit phases out if the parent’s modified adjusted gross income exceeds the maximum credit threshold, which is $200,000 for single filers and $400,000 for married filing jointly. For every $1,000 above the limit, the credit is reduced by $50.