What Is the Child Tax Credit?

With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $2,000 (for the tax year 2024) for each qualifying child under the age of 17. If you have children and are not married to the co-parent, your tax obligations and rights may be affected by any child support orders you have.

Below is a basic overview of the federal tax benefit for dependent children. It answers frequently asked questions (FAQ) about Child Tax Credit payments and discusses its relationship with child support.

How Does the Child Tax Credit Work?

The Child Tax Credit for tax year 2024 provides for a dollar-for-dollar reduction of tax liability. For each qualifying child claimed as a dependent, the maximum amount permitted is $2,000.

When both parents can claim the child, the IRS favors the parent who lives with the child the most during the year. The IRS measures the time based on the most overnight visits. The amount of tax reduction may vary by income. The maximum amount of $2,000 per qualifying dependent child is available for a single tax filer whose modified adjusted gross income (MAGI) was $200,000 or less.

With a joint married tax filer, the cutoff is a MAGI of $400,000 or less. If tax filers earn over those limits, there is a reduction formula that reduces the tax credit based on how much more the tax filer earns over those limits.

For some tax filers, there is also a refundable credit of up to $1,700 (for the 2024 tax year) called the Additional Child Tax Credit (ACTC). So, if the full credit available was not used to reduce tax liability to $0, you may be able to receive a refund of the remaining credit. Payment of any refund can occur through direct deposit to your bank account.

Parties with court orders from a divorce or parentage case will want to review any specific directives contained in their orders on who can claim the child tax credit in a given year.

Who Is a Qualifying Child?

To meet the eligibility requirements to claim the child tax credit, your child must be a “qualifying child." The Internal Revenue Service (IRS) defines a qualifying child as a person who meets the following conditions:

• Is claimed as your dependent
• Was under the age of 17 at the end of the tax year
• Is your biological child, adopted child, grandchild, stepchild or eligible foster child, your sibling, step-sibling, or their descendant
• Is a U.S. citizen or resident alien with a valid Social Security number
• In most cases has lived with you for at least half the year
• At least half the financial support of the child for the year came from you

Other Dependents and the Child Tax Credit

Older dependents may be eligible for a nonrefundable credit of up to $500 per dependent. To qualify, the dependent must be either 17 or 18 years old or a full-time college student aged 19 to 24.

The Child Tax Credit and Tax Filing Status

The Child Tax Credit is separate from the head of household status. You may be able to file as head of household even if you don't claim your child as a dependent on your return.

Am I Eligible for Other Tax Credits?

If you can claim the Child Tax Credit, you might also qualify for other tax credits, such as:

1. The Child and Dependent Care Credit
2. The Earned Income Tax Credit (EITC)

The Child and Dependent Care Credit helps working parents with the cost of work-related childcare expenses. Families can claim a percentage of dependent care expenses, depending on their adjusted gross income.

The Earned Income Tax Credit is designed to assist low-income and moderate-income working families. You must meet certain criteria to qualify for this credit, including working and meeting income qualifications (which depend on your filing status and number of children). If you qualify, the credit reduces your tax liability dollar-for-dollar. It is also a refundable credit, meaning it can provide income to tax filers under certain circumstances.

Are There Limits to the Child Tax Credit?

Yes. The child tax credit is limited by modified adjusted gross income when your income is above the cutoff levels.

In addition, the tax credit amount is only partially refundable. The limit on the credit refund is $1,700 for the 2024 tax year. This is called the Additional Child Tax Credit. Families must have at least $2,500 in earned income to qualify for the Additional Child Tax Credit. Tax filers who complete IRS Schedule 8812 will determine whether they qualify for the Additional Child Tax Credit.

How Do I Claim the Child Tax Credit?

You may claim this tax credit on Form 1040 or 1040A. Details on how to compute the credit can be found in the forms' instructions and in Schedule 8812.

How Does Child Support Affect the Child Tax Credit?

Child support payments are not taxable income to the person in receipt. They also are not tax-deductible to the person paying them. But, child support does affect the Child Tax Credit. Can the paying parent claim the credit?

If a child's parents are not married, only the parent using the dependency tax exemption can claim the credit. But, the IRS allows the non-custodial parent to claim the child as a dependent if the special rule for a child of divorced or separated parents applies.

The parent with primary custody (usually the parent who receives child support) may use IRS Form 8332 to release the exemption to the other parent. In that circumstance, the parent paying child support would qualify for the dependency exemption and, therefore, the Child Tax Credit. The non-custodial parent needs to attach a copy of the release to their tax return.

Some parents agree to take turns claiming a child on their tax returns. For example, one parent claims the even years. The other parent claims the odd years.

Tax filers will want to check their court orders as they may provide clear direction. An agreement or order on who gets the Child Tax Credit should appear in your divorce decree, separation agreement, or parentage/child support order.

If the other parent has wrongfully claimed the children on their tax return, you can get into trouble with the IRS if you also claim them. Once the IRS notices two adults are claiming the same child separately, they will flag the tax return. They will send an audit letter or a warning.

The IRS does not focus on whether this was done intentionally or accidentally. One option to consider is to file a motion to enforce the terms of your divorce decree or parentage order and get your rightful dependent credits.

How Does a Child Support Arrearage Affect Taxes?

The parent ordered to pay child support (the obligor) may face difficulty at tax time if there is past-due child support owed at the end of the tax year. Many states provide that the party otherwise designated to claim the dependency tax exemption cannot do so if they are substantially in arrears at year's end.

An obligor with arrears may not see their federal tax refund. The local child support agency can intercept a federal tax refund of an obligor to pay down arrears.

Get Professional Legal Help With the Child Tax Credit

Sorting out your taxes as a single parent can be time-consuming and complicated. For help completing your income tax returns, consider contacting a tax preparation professional.

If you need legal advice about child support and tax rights, consider contacting an experienced family law attorney in your area. An attorney can help you understand your eligibility and maximize the benefits available to you. They can also provide valuable legal advice and support, including help filing modifications or disputes.