Everything about Child Tax Credit (CTC)
Raising a child can be expensive, one of the most significant expenses for many American Taxpayers. Various studies have found that the cost of raising a child can go up to $200,000, and taxpayers with children need to be well aware of its consequences on their tax bills. The Child Tax Credit, or the CTC, is one of these implications and often proves to be one of the biggest tax deductibles for many taxpayers. Therefore, taxpayers with children must know the Child Tax Credit and understand how to claim it. Let us delve deeper into this topic and learn about the Child Tax Credit.
History of Child Tax Credit
The American government devised this tax credit to help low-income families better care for their children and families. However, it is essential to know that introducing these credits has not been majorly beneficial to low-income families, as previously, the rules related to it could have been more practical. At a point in time, the CTC was only given to families with three or more children, and the amount of tax credits made available to the public was way less. Several amendments have been made to the laws and regulations related to the CTC. Since 2022, these amendments have somewhat been observed to be effective as more people receive help from the government in the form of CTC,
How much Child Tax Credit you can get:
The amount of Child Tax Credit one can avail depends upon the number of children raised by a taxpayer and the age of these children. For children under the age of 6, parents can avail of a Child Tax Credit of $3,600. This is the maximum tax credit available for a single child. For children 6 to 17 years old, you can avail of a maximum tax credit of $3,000. You cannot claim this tax deductible for a kid above 17 years old. However, if your kid is more than 17 years old and is still a student that depends on you, you can take the student credit. You can receive half of the tax credit you are eligible for every month and get the remaining half when your tax refunds get credited for the year.
Who can get the Child Tax Credit
If you file your taxes separately and your AGI is below $75,000, you can file a claim for the total amount of the Child Tax Credit. However, if you are married but file your taxes jointly with your spouse, you can avail of the full Child Tax Credit if the total AGI of your family is below $1,500. If your AGI crosses these limits, you lose $50 for every additional $1000 above the AGI limit. In addition to the AGI limit, another qualifying factor must be met for taxpayers to avail of the Child Tax Credit. Parents can claim a Child Tax Return for children under 17 years old. The tax credit for children under six years is higher than it is for children older than six years. It is also essential for the mentioned child to live with the parent for more than six months within a year. The six months to be counted don't have to be consecutive. Child Tax Credit is also provided in many cases where the child lives away from the parent.
Process of claiming the tax credit
Parents need to remember that even if they do not file tax returns, they can avail of the Child Tax Credit 2022. To file a Child Tax Credit 2022 claim, one must file the 1040 Form. A taxpayer willing to claim CTC must attach a Schedule 8812. You can file your claim on paper like any other tax deductible. However, it is suggested that the taxpayer mentions the Social Security Number of their children to ensure that they receive tax returns at the earliest. You must provide the right SSN to ensure your returns. You will be required to file an amended tax return to the IRS, to make changes in the tax return. This takes a lot of time. It is also suggested that the taxpayers ensure that they only claim the tax credit for children, not availing the same for themselves.
Example of Child Tax Credit
Suppose you have a five-year-old daughter and earn $60,000 per year. This implies that your earnings are within limits set by the IRS to receive the full child tax credits. However, if you make more than $150,000 as a couple with your spouse, or $112,500, as a single parent, you would have to pay a phase-out that reduces the first $1,600 parents receive if their kids are five years or younger. In addition, if you have another phase-out in the picture, you would start losing money on the $2,000 Child Tax Credit. The phase-out lowers the credit by $50 per $1,000 you earn above the limit. If you, as a single parent, earn $117,000, you would be entitled to a Child Tax Credit of $1,750, and so on. This is how the Child Tax Credits you are eligible for, are calculated.
Although the tax filing process might appear straightforward, there's always a catch, and you must be aware of all the laws and regulations related to the tax credit you intend to apply for. It would be best if you met several conditions to qualify for the Child Tax Credit. These conditions include a range of AGI based on the taxpayer's filing status and the kids' age listed on Form 1040. If you are a business owner working towards expanding your business, keeping track of all the tax deductions you can benefit from and accumulating the documents that need to be produced to back these claims can get hectic. Taxpayers need to be able to file all the deductions they are eligible for to keep their tax bills low. NSKT Global specializes in accounting and strategizing one's tax returns. The team of experienced professionals at NSKT Global requires credentials to connect your bank account to their infrastructure, allowing them to access information regarding the tax deductions you are entitled to. Top-of-the-line infrastructure, combined with highly affordable prices, proves to be beneficial for SMEs. Click here to find out how NSKT Global can help you keep an eye on all your tax affairs and lower tax bills!
1. Which form do I need to fill up to avail of the Child Tax Credits?
You would need to fill up Form 1040. To file for child tax credits, one must list them, just like the remaining tax deductions and refunds.
2. What do I need to do with Form 1040 to avail of the Child tax credit?
You need to fill up the name of your children and their SSNs to file a claim for the CTC.
3. How can NSKT Global help me lower my tax bills?
NSKT Global helps you stay on top of your accounts and strategize the best tax return strategies, so your tax liabilities go down this year.