It costs a lot to raise a child—$12,980 annually per child, on average, according to the U.S. Department of Agriculture’s most recent estimates. That figure doesn’t even include the cost of a college education. 

Fortunately, the Child Tax Credit (CTC) can help offset some of those costs. 

In this article, we explain what the Child Tax Credit is and answer some of the most frequently asked questions we get about this widely available tax benefit. 

What Is the Child Tax Credit? 

The Child Tax Credit is a federal tax credit available to taxpayers with qualifying dependent children under age 17.  

Congress created the credit in 1997 to help U.S. taxpayers reduce the financial burden of raising children. The credit amount and rules for claiming it have varied over the years, but for the 2024 tax year, the maximum credit is $2,000. 

What Is the Additional Child Tax Credit? 

Up to $1,700 of the Child Tax Credit is refundable as the Additional Child Tax Credit (ACTC). This means that even if the taxpayer’s federal income tax liability is zero, they may still receive a refund of the unused credit amount. 

Do States Offer a Child Tax Credit? 

As of May 2024, 15 states have a child tax credit. Eligibility criteria, income thresholds, and credit amounts differ from state to state.  

The National Conference of State Legislatures maintains a schedule summarizing CTC laws by state. 

Who Can Claim the Child Tax Credit? 

Taxpayers can claim the CTC for each qualifying child with a valid Social Security number. Qualifying children must: 

• Be under the age of 17 at the end of the tax year 

• Be the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepsibling, half-sibling, or a descendant of one of those (such as a grandchild, niece or nephew) 

• Provide no more than half of their own financial support during the tax year 

• Live with the taxpayer for more than half of the tax year (with some exceptions for temporary absences) 

• Be claimed as a dependent on the taxpayer’s federal tax return 

• Be a U.S. citizen, U.S. national, or U.S. resident alien 

• Not file a joint return with a spouse or file it only to claim a refund of withheld tax or estimated taxes paid 

Are There Income Limits for the Child Tax Credit? 

Yes. The credit begins to phase out for taxpayers with a modified adjusted gross income (MAGI) above $200,000 ($400,000 for married couples filing jointly). 

For each $1,000 (or fraction thereof) of income over that threshold, the available tax credit is reduced by $50. 

How Do You Calculate the Child Tax Credit? 

To calculate the CTC, taxpayers under the income threshold simply multiply the number of qualifying children by the credit amount of $2,000.  

For example, say you are a single parent with two qualifying children and a MAGI of $180,000. You would be eligible for the full child tax credit of $4,000 ($2,000 per child). 

Taxpayers with income over those limits will receive a smaller credit due to income phaseouts. 

How Do You Claim the Child Tax Credit? 

To claim the Child Tax Credit, taxpayers must complete and file Schedule 8812, Credits for Qualifying Children and Other Dependents, with their federal income tax return. 

Make sure you confirm the information on Schedule 8812 is accurate and that you meet the eligibility requirements to claim the credit. If the Internal Revenue Service (IRS) determines you claimed the CTC recklessly or fraudulently, they can temporarily ban you from claiming the credit in the future. 

Who Claims the Child Tax Credit When Parents Share Custody with an Ex? 

When parents share custody of a child with an ex-partner or ex-spouse, only one person can claim the credit each year—parents can’t share or split the tax benefits. 

In general, the custodial parent—the one with whom the child lived for more nights during the tax year—gets to claim the credit. If the child lived with each parent for an equal number of nights, the custodial parent has the higher adjusted gross income. 

IRS Publication 504 has more tie-breaker rules to help divorced and separated decide who gets the credit. The non-custodial parent can also choose to release the credit to the non-custodial parent by signing Form 8332.  

What About the Expanded Child Tax Credit? 

In 2021, Congress expanded the CTC as part of the American Rescue Plan. That legislation: 

• Increased the maximum credit from $2,000 per child to $3,600 for children below the age of six and $3,000 for children under age 18 (subject to income limits) 

• Made the credit fully refundable so families with little or no tax liability could get a tax refund for the full child tax credit 

• Made advance payments of the CTC, so eligible families received monthly payments instead of waiting until they filed their tax returns 

However, the advance payments and other aspects of the American Rescue Plan’s expansion expired at the end of 2021. 

Currently, members of both political parties express interest in an expanded CTC. But as with many tax relief ideas, they don’t necessarily agree on how to go about it.  

Get Personalized Advice to Claim the Child Tax Credit 

The Child Tax Credit is a vital resource for middle-class families and helps reduce child poverty. However, navigating the eligibility requirements, calculating the credit, and understanding its impact on overall tax liability can be complicated. To ensure you maximize the benefits of the Child Tax Credit, work with a tax professional who understands the applicable federal and state tax laws. 

For help with the Child Tax Credit or any other tax-related matter, schedule a free consultation with PaulHood. We can help you navigate the complexities of your tax return and ensure you receive the financial assistance you need to support your family.