The federal government supports taxpayers in raising dependent children under 17 through Child Tax Credits and other tax credits. Millions of Americans take this benefit to get financial assistance to cover child bills, education, child care, and other expenses.
The CTC expansion debate has been going on for a long time. The goal is to support parents or guardians and reduce child poverty. Americans wondering about the Child Tax Credits for tax year 2024 due in 2025 can check the expansion possibility and 2025 credit here.
Child Tax Credit 2025
American families with dependent children who qualify for the Child Tax Credit receive the credit from the IRS. The non-refundable credit reduced the tax bill for the taxpayers dollar for dollar and allowed them to get a tax break. The tax credits like this can be claimed even when you don’t have any income to report.
According to the data, around 48 million taxpayers receive this support to raise their children with the rising cost of living. The high-income earners taxpayers can be entitled to CTC but for partial credit only.
In 2025, taxpayers may receive the Child Tax Credit up to $2000 for a qualifying child. The refundable part of CTC, that is, ACTC (Additional Child Tax Credit) is up to $1700, which was $1600 for the 2023 tax year.
Recently, the IRS announced the tax inflation adjustment for the 2025 tax year, where as well the authority has kept the refundable portion up to $1700.
Who qualifies for Child Tax Credit 2025?
Americans who meet the following eligibility requirements for qualifying children can claim the Child Tax Credit for the 2024 tax year:
- The child’s age should be under 17 at the end of the 2024 tax year.
- The child is claimed as a dependent in your tax return. The child must not have filed a tax return with their spouse or file a refund claim for estimated tax paid or withheld income.
- The child’s relation with the filer can be son, daughter, step-daughter, step-son, foster child, brother, sister, half-brother, half-sister, step-sister, step-brother, or descendant of any of them, like grandchild, nephew, or niece, etc.
- The child should be living with you or living with you for a minimum half-year.
- You are responsible for the primary care, food, shelter, and other expenses of the child.
- The child or children must not provide financial support or more than half of the support in the tax year.
- The child must be a US citizen living in the US or a qualified US resident Alien.
- The income threshold to receive the CTC is the same as the 2023 tax year. So, to receive the CTC for the 2024 tax year, your income should not exceed $200,000 (for individuals) and $400,000 (for married filing jointly).
Taxpayers who earn above the income threshold will have to lose the credit for each $1000 income above the limit by a $50 credit amount.
What is an Additional Child Tax Credit (refundable)?
The ACTC is the refundable portion of the non-refundable CTC, which allows families to have the refundable portion when they owe taxes less than the qualified credit amount. The non-refundable CTC means it could reduce your tax bill to zero, so families who wish to get the unused credit can claim ACTC.
The unused credit is annually set under the tax inflation adjustment, which we have mentioned earlier, as $1700 for the 2024 and 2025 tax years. With ACTC, the government intends to support parents or guardians with low to moderate income to get unused credit.
How to claim Child Tax Credit 2025?
The taxpayers can claim the CTC with their tax returns to receive the credit with their tax refund. Taxpayers should follow the below instructions when they meet the eligibility conditions and are ready to claim the CTC:
- First, you should prepare the relevant documents or info for the application, your Child’s Social Security number, your Social Security number, proof of the child living with you, income proof, and others.
- Next, you should ensure that you mention your child and other dependents in the 1040 tax form.
- For CTC, you must attach Schedule 8812 for Credits for Qualifying Children and other dependents and fill the form with the tax return.
- Once you file your tax returns timely, the IRS will review your tax return and credit eligibility.
Once the tax return is approved, you will receive the tax refund within 21 days of your tax return. However, if you have an ACTC claim, it will be processed after 15 Feb 2025 due to the PATH Act obligation that limits the agency to not process the EITC/ACTC claims till 15 Feb.
What happens to the CTC after TCJA ends?
The Tax Cuts and Job Act 2017 has hiked the Child Tax credit from $1000 to $2000 for each qualifying child with an income threshold of $200,000 for single filers and $400,000 for married but filing jointly filers. The TCJA 2017 was enacted under the Trump administration during his first reign.
The TCJA 2027 will now expire soon by the end of 2025, meaning the CTC will be back to $1000 from 01 Jan 2026. If this happens both businesses and children will be affected, thus the expansion of CTC has become a center of discussion for a long time.
Will the government expand the CTC in 2025?
The newly elected President Donald Trump and Republicans have also mentioned CTC during his campaign. His transition team co-chair JD Vance has supported the idea of CTC expansion and said the cTC should be expanded to $5000 per qualifying child.
Trump will take the President’s office on inauguration day, which will be held in January 2025. After he takes office, Americans can expect the CTC expansion news as currently, the administration has not revoked any plan for CTC. Since the TCJA Act was introduced by Trump we can expect the expansion soon, however, the expansion model is still a question.
CTC is essential support that millions of Americans take advantage of to cover their children’s expenses and fulfill their needs. The credit is a boon for many, let’s see if the newly elected government will expand it or not in 2025.
