At this point of the year, a lot of people are starting to buckle down and focus on taxes. And it’s definitely a good idea to start gathering your paperwork, whether it’s 1099 forms from your brokerage account or tax forms from your employer.
Now, you may be aware that when filing your 2023 taxes, there are different credits you can look into. One such credit is the Child Tax Credit.
You may have heard that the Child Tax Credit was a pandemic-era benefit that’s now long gone. But that’s actually far from the truth.
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The Child Tax Credit is still in play
In 2021, lawmakers passed a massive stimulus package to help Americans cope with the financial fallout of the pandemic. One part of that package included a boosted Child Tax Credit.
Not only did the maximum value of the Child Tax Credit get a lift for the 2021 tax year, but the credit became fully refundable. This meant that someone with no tax liability could still receive the full value of the credit from the IRS.
The boosted Child Tax Credit went away in 2022. But the pre-pandemic version of the credit still exists. So if you’re eligible for it, it’s something you’ll want to claim on your upcoming tax return.
To qualify for the Child Tax Credit, you need to have a dependent child under age 17. And if you have multiple children in that category, you can claim the credit on a per-child basis.
However, there are income limits associated with the credit. If you’re single, the credit starts to phase out with a modified adjusted gross income (MAGI) over $200,000. If you’re married and filing a joint tax return, the phase-out starts at a MAGI of $400,000.
For the 2023 tax year (which, remember, is the year you’re filing a tax return for now), the Child Tax Credit is worth up to $2,000 per child, of which $1,600 may be refundable. Do note that for the 2024 tax year, the refundable portion of the credit will rise to $1,700. But you’re not filing your 2024 taxes until next year, so for now, keep that $1,600 limit in mind.
Will the Child Tax Credit get a boost?
Some policymakers have been fighting for an enhanced version of the Child Tax Credit since 2022. And recently, lawmakers introduced a proposal that would make the credit more refundable.
As mentioned, only $1,600 of the credit is refundable for the 2023 tax year, and only $1,700 is refundable for 2024. Under this new proposal, the credit’s refundable portion would increase as follows:
- $1,800 for tax year 2023
- $1,900 in tax year 2024
- $2,000 in tax year 2025
The above-mentioned proposal has yet to pass as of this writing. But even if it doesn’t, the credit still offers a lot of value. So it pays to see if you’re eligible.
And if you’re not sure, consult a tax professional. It may be worth it to pay a modest fee if it results in your ability to pocket up to $2,000 per child from the IRS at tax time this year, and in any future year when the Child Tax Credit remains on the table.
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