Thousands of families in the United States can benefit from the Child Tax Credit (CTC), which reduces the tax burden by up to $2,000 per child. This program has been a valuable resource for families with dependent children, but its continuation may be jeopardized if the current legislation is not extended beyond 2025.
The CTC currently provides a discount on tax returns for taxpayers with children. However, there are certain eligibility requirements for this benefit, such as the dependent’s age, relationship with the taxpayer, and income limits. With the potential expiration of the law extending this credit, millions of families may receive a smaller amount beginning in 2026.
As the deadline for Congressional decision approaches, many people are wondering how the CTC works today, what the changes might be and how to claim this benefit before modifications are implemented in the tax legislation.
Requirements and operation of the IRS Child Tax Credit
The Child Tax Credit reduces your tax bill by up to $2,000 for each child under the age of 17 who meets the Internal Revenue Service’s (IRS) requirements. To qualify, a dependent must meet the following requirements:
- Be a biological child, stepchild or direct relative of the taxpayer.
- Have lived with the taxpayer for at least half of the tax year.
- Be claimed as a dependent child on the tax return.
In terms of income, the CTC gradually decreases for those earning more than $200,000 per year or $400,000 in the case of joint tax returns. These rules have been in place since the Tax Cuts and Jobs Act of 2017 (TCJA), but the TCJA may expire in 2025, reducing the credit to $1,000 per child and lowering the income thresholds for phase-out.
To improve this benefit, the House of Representatives passed legislation in 2024 to raise the maximum refundable CTC to $1,900 and adjust it for inflation. However, the Senate rejected the proposal, leaving the future of this tax support uncertain.
How to claim the IRS CTC and deadlines
To apply for the Child Tax Credit, you need to file your tax return with the IRS using one of the following forms:
- Form 1040: Personal Income Tax Return.
- Form 1040-SR: Return for persons 65 years of age or older.
- Schedule 8812: Allows you to claim the Additional Child Tax Credit (ACTC), with a maximum of $1,700 if the benefit exceeds the tax liability.
Those who have not claimed the CTC in previous years can still do so by filing an amended return using Form 1040-X. The deadlines for claiming the CTC for previous years are:
- For 2023: until April 15, 2027.
- For 2022: until April 15, 2026.
- For 2021: until April 15, 2025.
If you have already filed your return without including this credit and meet the requirements, you can correct it with the appropriate form to receive this benefit.
With potential changes on the horizon, it’s a good idea to monitor CTC updates and file your tax return on time to fully benefit from this financial relief.
