Child tax credit 2024: Child tax credit updates and payments

What is the Child Tax Credit?

The Child Tax Credit (CTC) is a tax benefit designed to ease the financial burden of caring for a child or children. The CTC provides financial assistance to people with children by reducing their federal income tax. If you have a child, or multiple children, under the age of 17, you may qualify for the CTC.

By directly lowering your taxes, the CTC could help to put more money back in your pocket. That means you’ll have more money for the everyday costs of raising kids, like school supplies, groceries, healthcare expenses, lessons, and more.

Child Tax Credit 2024

What’s changed about the CTC for the 2024 tax year? The CTC is still worth up to $2,000 per qualifying child. However, the refundable portion, known as the Additional Child Tax Credit (ACTC), is worth up to $1,700 (it was worth up to $1,600 in 2023).

That means if your CTC is worth more than your tax, you could get up to $1,700 back as a refund. This, of course, depends on how much you owe, your income and some other factors. However, this makes the CTC incredibly helpful for families with lower incomes in 2024 taxes.

$300 Child Tax Credit 2024: Is it true?

It is not true that families with qualifying children will receive an advance $300 monthly payment from the IRS for the CTC in 2024. A House of Representatives bill to provide monthly CTC payments for children under the age of 6 at $300, and children ages 6 to 17 at $250, failed to pass.

The proposed structure was similar to the CTC in 2021, which provided families with extra money during the COVID pandemic in the form of advanced payments from the CTC. However, in 2024, the CTC has reverted to the way it originally worked as a partially refundable tax credit. That means that it can reduce your tax to $0 and you could receive a portion of any remaining credit as a refund. You’ll also need to claim the CTC when you file your return.

Child Tax Credit 2024 payments

In the 2024 tax year, the CTC will not be paid out in the form of payments. Instead, it’s a tax benefit that can provide families with up to $2,000 in tax relief per qualifying child. If your tax is already $0, you could get up to $1,700 per qualifying child as a refund.

Who qualifies for the Child Tax Credit? 

To qualify for the CTC, your child must…

• Be under 17 years old at the end of the tax year.
• Have lived with you over half of the tax year except for temporary absences, like vacations, schools, camp, etc.
• Not have provided more than half of their own financial support during the year.
• Be a U.S. citizen, U.S. national, or U.S. resident alien.

Whether or not your child qualifies, and how much you may get, also depends on your filing status and income, specifically your modified adjusted gross income (MAGI), which is your income adjusted for certain deductions.

For single filers 

For married couples filing jointly

Calculate your Child Tax Credit 

The maximum credit amount for the CTC in 2024 is $2,000 per qualifying child. However, the actual amount you qualify for per child depends on your MAGI. As we mentioned above, the CTC starts phasing out at $200,000 for single filers and $400,000 for married couples filing jointly. For every $1,000 you make above these limits, your CTC will be $50 less.

For single filers

For couples filing jointly

In addition to your MAGI, the CTC amount you qualify for also depends on how many qualifying children you have. The more qualifying dependent children you have, the greater the credit you’ll qualify for.

Here’s an example

Let’s say Charlie is a single filer with a MAGI of $216,000 and three qualifying dependent children. Here’s how you would calculate Charlie’s CTC amount.

First, determine the base credit amount by multiplying the maximum amount by the number of qualifying children.

$2,000×3=$6,000

Next, calculate the phase-out amount. Remember, the CTC is worth $50 less for every $1,000 your MAGI is over the CTC income limit. Charlie’s MAGI is $16,000 over the phase-out limit. To calculate Charlie’s credit adjustment, divide the overage amount by $1,000, and then, multiply by $50.

$16,000÷$1,000=16

16×$50=$800

Finally, subtract Charlie’s credit adjustment from the base credit amount.

$6,000-$800=$5,200

Charlie would qualify for a CTC of $5,200 total, or $1,733 per child.

Additional Child Tax Credit 

The ACTC is the refundable portion of the CTC. If your CTC is greater than your tax, you may be eligible for up to $1,700 in a refund. Here are a couple things you need to know about the ACTC.

Who’s eligible for the ACTC?

To qualify for the ACTC, you must have a CTC that exceeds your tax and earned income of at least $2,500, which can come from self-employment, wages, or disability payments. The ACTC is designed for families who may not owe enough in taxes to use the full Child Tax Credit. If your income is unearned, like interest, alimony payments, child support, Social Security, pensions, etc., you may not qualify for the ACTC.

How do you calculate the ACTC?

The amount of the ACTC you can receive depends on many factors, including your income and the number of qualifying children you have. Typically, the refund is calculated as 15% of your earned income over $2,500, up to the maximum refundable amount of $1,700 per child.

Let’s say Donna’s MAGI is $20,000 and she has two qualifying children. To calculate Donna’s ACTC amount, the first thing you’ll need to do with determine how much of her income is over the $2,500 threshold.

$20,000-$2,500=$17,500

Then, multiple Donna’s income that exceeds the threshold by 15%.

$17,500×.15=$2,625

Because $2,625 is less than $3,400, which is the maximum ACTC for two children, Donna would qualify for the full $2,625. Keep in mind that the ACTC is calculated from what’s left over of the CTC after your tax has been calculated. Higher tax will mean a smaller ACTC.

How to claim the Child Tax Credit 

The first thing you’ll need to do to claim the CTC is to gather all the documentation. This includes Social Security numbers for each qualifying child, as well as your tax documents, such as your W-2s and any other income statements you have.

When you fill out your tax return, you’ll complete Form 8812 and the Child Tax Credit line on Form 1040. Form 8812 is where you’ll indicate the number of qualifying children you have, and it will guide you through calculating the credit.

You can also use Form 8812 to claim the Credit for Other Dependents (ODC). The ODC is a nonrefundable credit for dependents that don’t meet the qualifications for the CTC, such as dependent children over 17 or dependent relatives. It is $500 per qualifying individual.

Work with a Tax Pro to determine whether you’re eligible for the full credit or if your credit will be reduced due to income thresholds.

Claiming the CTC can significantly reduce your tax and maybe even result in a refund, providing valuable financial support to your family. Work with a Tax Pro to ensure you receive the full benefit you’re entitled to.