Child Tax Credit

If you raise one or more children, you likely understand just how expensive it can be to do so. It’s estimated that the total cost of raising a child to the age of 18 is right around $267,000. You can effectively reduce these costs by claiming the Child Tax Credit, which is designed to lower the amount of taxes you owe for the year. Even if you don’t owe taxes, the full credit can be claimed as a tax refund. The following goes into more detail about the Child Tax Credit and who qualifies for it. 

What Is the Child Tax Credit?

The purpose of the Child Tax Credit is to help families reduce taxes while also allowing parents to more easily pay for expenses related to their children. While the exact amount of the Child Tax Credit that you can qualify for depends on family size and total income, this credit amounts to as much as $3,600 for every child below six years old. For children between the ages of 6-17, the tax credit provides up to $3,000 per child. 

Keep in mind that this credit begins to phase out if you make more than $75,000 or if married couples make more than $150,000. Every $1,000 of income you make that’s higher than the phase-out stage will lower your credit by $50. If you don’t owe any taxes for the year, you’ll receive the full credit as a refund. 

Also read – MAKING THE MOST OUT OF YOUR QUALIFIED BUSINESS INCOME DEDUCTION

Do You Qualify for the Child Tax Credit?

If you want to claim the Child Tax Credit, you must meet three specific criteria, which include:

  • Qualifying child – Your child needs to be a “qualifying child” if you want to claim this credit.
  • Taxpayer identification number – Both parents must have an Individual Taxpayer Identification Number or a Social Security Number.
  • Income – There are no income requirements since earnings are necessary to qualify for this credit.

The following criteria must be met for a child to be a qualifying child:

  • The child in questions needs to be your daughter, son, stepchild, adopted child, grandchild, step-sibling, half-sibling, younger sibling, foster child, or descendant.
  • The child needs to be 17 years old or younger at the end of the previous tax year.
  • The child needs to live in the U.S. with you for at least half of the year. Keep in mind that this period of time doesn’t need to be consecutive.
  • The child needs to have a fully valid Social Security Number but won’t qualify if they have an ITIN.
  • The child needs to be a dependent in order to qualify.

Obtaining a Credit for Other Dependents

If you have other dependents, you may qualify for a smaller tax credit. For instance, a $500 tax credit is offered for qualifying dependents who are unable to be claimed with the CTC. These dependents can include children who have an Individual Taxpayer Identification Number. Qualifying relatives may also apply, which include parents who are dependent on you. This credit is considered to be non-refundable, which means that it’s only able to lower the amount of taxes you owe and won’t be provided as a refund. 

Also read – How much can I expect from social security retirement benefits

How You Can Claim this Credit

If you want to claim this credit, you’ll need to complete a couple of steps. To obtain these payments, you must have filed taxes for the 2020 tax year. If you have yet to sign up for the advance payment option, you’ll still be able to obtain the entire credit if you filed a 2021 tax return. 

In the event that you obtained monthly credit payments, you’ll need to file a tax return to obtain the remaining half of the tax credit. The IRS should have sent you Letter 6419 in January 2022 that details what your advance payments amounted to. For the 2022 tax year, you should receive the same letter in January 2023. 

If you have children, the Child Tax Credit can help you reduce your annual taxes by a considerable amount. At as much as $3,000-$3,600 per child, this credit can give you the money you need to cover current expenses and save for your child’s future. 

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