The Child Tax Credit has become more important as a result of the Tax Cuts and Jobs Act (TCJA) of late 2017. Now it’s the largest tax benefit of having children, along with the ability to file as “head of household.” The law eliminated exemptions for dependents, which formerly was a large tax benefit of having children.
With the credit, you can reduce your federal tax bill by up to $2,000 for each qualifying child.
Qualifying for the Child Tax Credit
You must satisfy all of the following to claim the credit:
- Age. The child must have been under age 17 at the end of the tax year for which you claim the credit.
- Relationship. The child must be your biological child, an adopted child, a stepchild, or a foster child. It’s also possible to claim certain other relatives if they meet all the other qualifications.
- Support. The child cannot have provided more than half of his or her own financial support during the tax year.
- Dependent. You must claim the child as a dependent on your tax return.
- Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Residence. Generally, the child must have lived with you for more than half of the tax year for which you claim the credit. But there are exceptions for children of divorced or separated parents. It’s possible to allow either such parent (but not both) to claim the credit.
- Social Security Number. The child must have a Social Security Number and you must provide the number to the IRS on your tax return. This is a new requirement.
- Income. For individuals filing as either “single” or “head of household,” you can claim the full $2,000 credit if your modified adjusted gross income (MAGI) does not exceed $200,000. Above $200,000 the credit phases out – with a complete phase-out at $240,000. These income figures are much higher than previously so many more parents will now be able to claim the credit.
If you have earned income and no or virtually no federal tax liability not counting the credit, you may be able to get up to $1,400 of the credit “refunded” to you, i.e. paid to you by the IRS.