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What is the Child Tax Credit (CTC)?
The Child Tax Credit (CTC) is a federal tax credit that provides up to $2,000 in tax reductions per qualifying child. To qualify for this credit, a child must meet several criteria:
– Be under the age of 17 by the end of the tax year.
– Be your son, daughter, stepchild, foster child, brother, sister, or a descendant of any of these (such as a grandchild).
– Have lived with you for more than six months of the tax year.
– Be claimed as a dependent on your tax return.
– Have a valid Social Security number[1][3][4].
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How the Child Tax Credit Works
The CTC operates as a dollar-for-dollar reduction in your tax liability. However, it does not provide a refund if the credit exceeds the amount of taxes you owe. For example, if you owe $1,000 in taxes and are eligible for a $2,000 CTC, you will only reduce your tax bill to zero; you won’t receive the remaining $1,000 as a refund.
The CTC also has phase-out limits based on your Modified Adjusted Gross Income (MAGI). For single filers, the phase-out begins at $200,000, and for joint filers, it starts at $400,000. For every $1,000 above these limits, the CTC is reduced by $50[2][4][5].
What is the Additional Child Tax Credit (ACTC)?
The Additional Child Tax Credit (ACTC) is the refundable portion of the CTC. This means that even if your CTC exceeds your tax liability, you can still receive up to $1,700 per child as a refund in 2024. To be eligible for the ACTC:
– You must have earned income of at least $2,500.
– Unearned income does not qualify.
– You must meet all the eligibility criteria for the standard CTC[2][3][4].
Calculating and Claiming the ACTC
To determine your eligibility for the ACTC, you’ll need to use the Child Tax Credit Worksheet found in the instructions for Form 1040. This worksheet will help you calculate how much of the CTC you can claim and whether any of it is refundable.
Once you’ve determined your eligibility and calculated your ACTC amount, you’ll need to complete Schedule 8812 and attach it to your Form 1040 when filing your taxes. This schedule is specifically designed for claiming the ACTC[1][3][4].
Example Scenario
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Let’s consider an example to illustrate how the ACTC works. Suppose a family has a tax bill of $1,000 and is eligible for a $2,000 CTC. Since their tax bill is only $1,000, they can reduce their tax liability to zero but still have $1,000 remaining from the CTC. Under the ACTC rules in 2024, they could receive up to $1,700 of this remaining amount as a refund[4].
Income Limits and Phase-Outs
The amount of ACTC you can receive is also affected by your income level. The phase-out thresholds are the same as those for the standard CTC: $200,000 for single filers and $400,000 for joint filers. For every $1,000 above these limits, your ACTC will be reduced by $50 until it reaches zero[2][4][5].
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Additional Considerations
There are a few additional requirements and considerations when claiming the ACTC:
– Each qualifying child must have a valid Social Security number.
– If you are filing Form 2555 or Form 2555EZ (related to foreign earned income), there may be specific rules that apply to your situation[3][4].
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