2023 Child Tax Credit: Changes, Eligibility, and Benefits
The 2023 Child Tax Credit is a valuable tool for families to offset the costs of raising children. While the enhanced credit available in 2021 has ended, the credit will continue at a lower level in 2023, as established by the Tax Cuts and Jobs Act of 2017.
Who is eligible for the 2023 Child Tax Credit?
The eligibility for the 2023 Child Tax Credit has become more restrictive and the credit amount has been reduced compared to 2021, due to the regulations set forth by the 2017 Tax Cuts and Jobs Act (TCJA). Unless Congress amends the credit before then, these changes will continue to be applicable until the fiscal year 2025, a published news article reported.
To be eligible for the 2023 Child Tax Credit, parents must:
- have dependents under the age of 17 as of December 31, 2022
- the child must also be able to be claimed as a dependent on the taxpayer’s return
- must have a valid Social Security number
- meet certain income requirements: with an adjusted gross income of less than $200,000 for single filers and $400,000 for married couples filing jointly to claim the full credit
How much is the 2023 Child Tax Credit?
Similar to the previous year, taxpayers who have qualifying children can receive a credit of up to $2,000 per child. However, this year, a part of the credit is refundable and there exists an income limit to claim the “Additional Child Tax Credit” of up to $1,500. Parents should also note that the 2023 Child Tax Credit is reduced by $50 for every $1,000 or fraction thereof that their income exceeds the income threshold.
The American Rescue Plan (ARP) brought significant changes to the credit in 2021, allowing families to receive half of the credit value over six months, rather than receiving it as a lump sum during tax filing. The remaining half of the credit was then claimed during tax filing, leading to a rise in the number of returns processed by the IRS.
Is the 2023 Child Tax Credit refundable?
The 2023 Child Tax Credit is partially refundable, meaning that taxpayers who owe less in taxes than the refundable amount will have the remainder added to their tax refund. The non-refundable portion will reduce taxes owed dollar-for-dollar. In order to claim the refundable portion, filers must complete Schedule 8812.
Lower-income Americans who have an income of at least $2,500 are eligible for the refundable portion of the credit, with the amount claimed calculated as a portion of earnings above that threshold.
In summary, the 2023 Child Tax Credit remains a valuable resource for families, but the rules and requirements for claiming the credit have changed from the enhanced version available in 2021. It is important to review the eligibility requirements and complete the necessary forms when filing your taxes to ensure that you receive the full benefit of the credit.