What is the Child Tax Credit?
The Child Tax Credit uses a parent’s modified adjusted gross income to provide a partially refundable tax credit for the 2023 tax year. A partially refundable credit means that you can receive a portion of the credit even if you do not have income tax liabilities for the tax year. This means that if a parent qualifies for the credit and files taxes, they may claim the credit.
Can all parents claim the Child Tax Credit?
No. Parents are required to file taxes and qualify under residency requirements and income limits in order to claim the Child Tax Credit.
Parents who have their main home in the U.S. for more than half of the year and have children who are 16 or younger on the last day of the year meet the residency requirement. U.S. military personnel and federal employees assigned outside of the U.S. also qualify.
There are income limits that apply to the Child Tax Credit. At the time of the writing of this article, for 2023, a qualifying parent is required to have the following modified adjusted gross income (MAGI):
- $200,000 or less for those who file single, head of household, or married filing separately.
- $400,000 or less for those who file married filing jointly.
If taxpayers exceed those income limits, the credit is reduced by $50 for each $1,000 of additional income above the threshold until the credit is reduced to $0.
How much is the Child Tax Credit and what changed in 2023?
Unless legislation is passed, some of the temporary changes that were made to the Child Tax Credit in 2021 will not apply in 2023. Some of the changes for 2023 include:
- The credit amount is reduced to $2,000.
- No portion of the credit is available in advance.
In 2021, the Child Tax Credit was available for children that were 17 or younger at the end of the tax year. In 2023, children who are 16 or younger at the end of the tax year qualify for the Child Tax Credit.
Are cash payments available for the Child Tax Credit?
No. For a portion of 2021, the IRS paid part of the Child Tax Credit in advance. Those advance payments were not available during 2022 and are not slated to be available for 2023. There are, however, ongoing political efforts to renew the monthly Child Tax Credit payments, but a change does not look likely at this point.
Do co-parents that share custody and support 50/50 both get the Child Tax Credit?
No. If parents file taxes separately, the parent that claims the child as a dependent on their tax return receives the credit. If parents file separately and both try to claim the child as a dependent, the IRS only recognizes one parent’s claim. In these situations, the parent with whom the child primarily lives is typically the one who the IRS allows to claim the child as a dependent. In short, there is one credit for each child.
Often, joint child custody agreements with income tax provisions control who receives the credit. These agreements can, however, provide for alternating years or other creative solutions to ensure both parents share the tax benefits.
Will the Child Tax Credit affect public benefits?
The Child Tax Credit has no impact on any public benefits. Even more, the Child Tax Credit is not subject to offset for overdue taxes or other federal or state debts that taxpayers or their spouses owe. However, money owed for child support may continue to offset these credits.
To learn more about the Child Tax Credit, other tax breaks, or to get some tax legal help, reach out to a Rocket Lawyer network attorney. Want to leave these tax credits and deductions to the pros? Get matched with a tax pro via Rocket Tax™ to save time and money filing your tax returns.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.