The Child Tax Credit

When it comes to filing taxes, it’s essential to ensure that you take advantage of every tax credit and deduction available to you. One credit that is often overlooked is the child tax credit. This credit is designed to provide tax relief to parents who have dependent children, and it can make a significant difference in your tax bill.

What is the Child Tax Credit?

The child tax credit is a credit that allows parents to reduce their tax liability by up to $2,000 for each qualifying child under the age of 17. To qualify for the credit, the child must be your dependent, and they must have a valid social security number. The credit is also subject to income limits, and the amount of the credit will be reduced or phased out entirely for high-income earners.

In addition to the child tax credit, there is also a refundable portion of the credit called the Additional Child Tax Credit (ACTC). This credit is available to parents who have at least one qualifying child and who are unable to claim the full amount of the child tax credit due to their income. The ACTC can provide up to $1,400 per child as a refund, even if you don’t owe any taxes.

Changes to the Child Tax Credit in 2021

In 2021, the child tax credit underwent some significant changes as part of the American Rescue Plan Act. For tax year 2021, the credit increased to $3,000 per qualifying child between the ages of 6 and 17, and up to $3,600 for children under the age of 6. Additionally, the age limit for qualifying children was raised to age 18, and up to age 24 for full-time students. The credit is also now fully refundable, which means that even parents with little or no tax liability can receive the credit as a refund.

How to Claim the Child Tax Credit

To claim the child tax credit, you must include Form 8812 with your tax return. This form will ask for information about your qualifying children, including their names, social security numbers, and dates of birth. You’ll also need to provide information about your income, as the credit is subject to income limits. If you’re unsure whether you qualify for the credit, the IRS provides a helpful online tool that can help you determine your eligibility.

Conclusion

The child tax credit is an essential credit for parents, as it can provide significant tax relief. If you have dependent children, make sure to take advantage of this credit by including Form 8812 with your tax return. And with the recent changes to the credit, parents can now receive even more substantial tax relief, making it an even more valuable tool for families.