The tax code in the United States includes several provisions aimed at providing financial relief to families, and one of the most well-known of these provisions is the Child Tax Credit (CTC). The CTC is designed to assist families with the costs of raising children and can result in a significant tax benefit. However, it’s important to understand how the CTC works and what changes may be in effect for 2023.
Child Tax Credit Basics:
The Child Tax Credit is a federal tax credit that provides financial assistance to eligible families who have dependent children under the age of 17. The credit is designed to reduce the overall tax liability of qualified taxpayers, and if the credit exceeds the tax liability, it can lead to a refund. The CTC is typically claimed when you file your annual federal income tax return.
Changes for 2023:
It’s important to note that the Child Tax Credit has undergone significant changes in recent years. In 2021 and 2022, as part of the American Rescue Plan Act, the CTC was temporarily expanded. This expansion included an increase in the credit amount and the introduction of monthly advance payments to eligible families.
For 2023, the CTC is set to revert to its previous form before the temporary expansion, as outlined in the Tax Cuts and Jobs Act. This means that the credit amount and eligibility criteria will return to their pre-2021 levels.
Child Tax Credit Amount for 2023:
For the tax year 2023, the Child Tax Credit provides a maximum credit of up to $2,000 per qualifying child. A qualifying child must meet certain criteria, including being under the age of 17, related to the taxpayer, and living with the taxpayer for at least half of the year.
The amount of the Child Tax Credit you can claim may be subject to income limitations. These limitations are designed to phase out the credit for higher-income families. In 2023, the phase-out begins for single filers with an adjusted gross income (AGI) of $200,000 and for married couples filing jointly with an AGI of $400,000.
The credit is reduced by $50 for each $1,000 (or fraction thereof) by which the taxpayer’s AGI exceeds the threshold. If your income is above the phase-out threshold, you may still be eligible for a partial credit.
To claim the Child Tax Credit, you must also ensure that your child meets the following qualifications:
- The child must be a U.S. citizen, U.S. national, or resident alien.
- The child must have a valid Social Security number.
- The child must not provide more than half of their own financial support.
- The child must be a direct descendant or a qualifying relative.
Additional Child Tax Credit:
In some cases, if you are eligible for the Child Tax Credit and the credit exceeds your tax liability, you may be able to claim the Additional Child Tax Credit. This allows you to receive a refund for the excess credit amount.
State Tax Credits:
It’s essential to remember that some states offer their own child-related tax credits, which can vary widely in terms of eligibility and benefit. Be sure to check the specific tax laws in your state to see if there are additional credits available to you.
In conclusion, the amount you get back in taxes for a child in 2023 will depend on various factors, including your income, the number of qualifying children, and your eligibility for the Child Tax Credit. While the credit amount for 2023 is set to revert to $2,000 per qualifying child, it’s crucial to stay informed about any changes in tax laws, consult with a tax professional, and take advantage of any available tax credits to help ease the financial burden of raising a family.