Every dollar counts when it comes to raising children, and tax credits can help. This coming tax season, you may be eligible for child tax credits at the federal and state levels, and if so, you will want to make sure that you receive what is due to you. Here are the details of the newest child tax credit:

What is the child tax credit?

The child tax credit is a federal tax incentive for those with children. It is different from the child and dependent care credit, which is meant to help you to pay for childcare while you work (it’s a good idea to check and see if you qualify for that one, too).

How much is the child tax credit?

For the 2023 tax year, you may be eligible for a child tax credit of up to $2,000 for each dependent under the age of 17. In addition, $1,600 may be refundable through the additional child tax credit. For the 2024 tax year, it may be worth $2,000 per qualifying child with up to $1,700 fully refundable.

Who is eligible for the child tax credit?

You must meet certain criteria to qualify, such as income, and the child tax credit phases out higher earners. If your modified adjusted gross income is greater than $400,000 (married filing jointly) or $200,000 (all other filers), then your credit is reduced by $50 for each $1,000 that you exceed the threshold.

There are additional requirements:

  • Your child must be under age 17 by the end of 2023 if filing for that tax year.
  • You must be able to claim the child as a dependent.
  • You should have provided at least half of the child’s support during that year, and the child lived with you for at least half of the year.
  • The child must have a familial relationship with you (e.g. the child is a son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister or descendant of those people - such as a grandchild, niece, or nephew).
  • The child must be a U.S. citizen, U.S. national or U.S. resident alien with a valid Social Security number.

What portion is refundable?

The child tax credit is a credit that reduces your tax burden, or how much you owe the government. If you qualify for the child tax credit but the taxes you owe are less than the credit amount, you may qualify for a partial refund by claiming the additional child tax credit. You must have an earned income of at least $2,500 or have three or more qualifying dependents.

You can claim this tax credit on Form 1040 or 1040-SR. You also will need to fill out Schedule 8812 (credits for Qualifying Children and Other Dependents). This will help you determine if you are able to claim a partial refund. The maximum refund for 2023 is $1,600 per dependent.

A few states – including Pennsylvania -- have their own child tax credit.

If you are eligible to receive the federal child tax credit, then you also may qualify for Pennsylvania’s Expansion of Child and Dependent Care Enhancement Tax Credit. Legislation signed by Governor Josh Shapiro has expanded this credit to help more Pennsylvania families.

For one child, the minimum credit is $600, and the maximum is $1,050. For two or more children, the credit ranges from $1,200 to $2,100. Children must be under age 13 or be an individual who is physically or mentally incapable of self-care. The credit is fully refundable. When filing for this credit, you will need to fill out a PA Personal Income Tax Return (PA-40) and a PA Schedule DC, which is an additional form to report information on your dependents.

Finances can be a complicated part of divorce or custody issues. If you are seeking the help of a top Bucks County family law firm, contact us at 215-340-2207 or email info@bucksfamilylawyers.com.