Thousands of families in the United States can benefit from the Child Tax Credit (CTC), a tax relief that reduces the tax burden by up to $2,000 per child. This program has been a key help for households with dependent children, but its continuity could be affected after 2025 if an extension of the current legislation is not approved.
Currently, the CTC allows taxpayers with children to get a discount on their tax return. However, there are certain requirements to be eligible for this benefit, such as the age of the dependent, the relationship with the taxpayer and income limits. With the possible expiration of the law extending this credit, millions of families could get a smaller amount starting 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 allows you to reduce your tax bill by up to $2,000 for each child under 17 years of age who meets the requirements of the Internal Revenue Service (IRS). For a dependent to qualify, he or she must meet the following conditions:
- 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 begins to be gradually reduced for those earning more than 200,000 dollars a year or 400,000 dollars in the case of joint tax returns. These rules have been in force since the Tax Cuts and Jobs Act of 2017 (TCJA), but the TCJA could expire in 2025, which would reduce the credit to $1,000 per child and lower the income limits for phase-out.
In an attempt to improve this benefit, the House of Representatives passed a bill in 2024 to increase 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 up in the air.
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 you meet the requirements, you can correct it using the appropriate form to ensure you get this benefit.
With potential changes on the horizon, it’s a good idea to keep an eye out for CTC updates and file your tax return on time to take full advantage of this financial relief.
