Understanding Child Tax Credit And Who Can Qualify For 2024?

The Child Tax Credit (CTC) continues to offer significant financial relief to families, allowing taxpayers to claim up to $2,000 per qualifying child and an additional $500 for other dependents. However, the credit phases out for taxpayers with a Modified Adjusted Gross Income (MAGI) exceeding $200,000 (or $400,000 for those filing jointly).

Who Qualifies as a Dependent Child for the CTC?

To qualify for the Child Tax Credit (CTC), a dependent child must satisfy several eligibility criteria established by the IRS. These requirements are designed to ensure that the child’s relationship, age, citizenship, residency, support, and filing status align with the credit's objectives:

1. Relationship: The child can be your biological child, stepchild, adopted child, foster child, sibling (including half-siblings and stepsiblings), or a direct descendant of any of these (such as a grandchild or niece).
2. Age: To qualify, the child must be under 17 years of age by the last day of the tax year. This means children turning 17 during 2024 do not qualify for the credit in that year.
3. Citizenship/Residency: The child must be a U.S. citizen, U.S. national, or a U.S. resident alien, as determined by federal tax law.
4. Support: The child must not have provided more than half of their own financial support during the tax year. This ensures they are primarily dependent on the claimant.
5. Residence: The child must have lived with the taxpayer for more than half of the tax year. Temporary absences (e.g., for education, medical care, or military service) may not disqualify the child.
6. Filing Status: The child cannot file a joint tax return unless it is exclusively for claiming a tax refund and not for paying taxes owed.
7. Dependent Claim: The taxpayer must claim the child as a dependent on their tax return, fulfilling the dependency criteria under IRS rules.

Note: 

Ensure you keep accurate records, such as birth certificates, proof of residency, and financial support documents, to substantiate your claim in case of an audit. This documentation can be vital for proving eligibility and avoiding issues during the filing process. 

 

Understanding “Other Dependents”

Dependents who do not meet the criteria for the Child Tax Credit may still qualify for the Other Dependent Credit (ODC), which is worth $500. These include:

1. Children Over 17: Dependents who are 17 years or older.
2. Qualifying Relatives: Dependents who meet specific conditions outlined below.

Criteria for Qualifying Relatives:

To claim someone as a qualifying relative, they must meet the following requirements:

1. Relationship/Household: Be a member of your family or household.
2. Gross Income: Their gross income must be below $4,700 in 2024.
3. Support: You must provide more than half of their financial support during the tax year.
4. Not a Qualifying Child: They cannot qualify as another taxpayer’s dependent child.

Unlike qualifying children, there is no age limit for qualifying relatives.

Examples of Qualified Relationships:

Qualified relatives include:

• Children and Descendants: Grandchildren, great-grandchildren.
• Siblings: Step-siblings, half-siblings.
• Parents and Grandparents: Excluding foster parents.
• Extended Family: Aunts, uncles, nieces, nephews.
• In-Laws: Parents-in-law, sons-in-law, daughters-in-law.

Note: 

For the ODC, only U.S. citizens, nationals, and residents qualify. Dependents from Canada or Mexico do not qualify unless they are adopted U.S. citizens residing with you.

Additional Child Tax Credit (ACTC)

If you are unable to claim the full Child Tax Credit due to a lack of tax liability, you may qualify for the refundable portion known as the Additional Child Tax Credit (ACTC).

ACTC Refundable Limits:

• 2024: Up to $1,700 per qualifying child.
• 2023: Up to $1,600.

ACTC Calculation:

• With Fewer Than Three Qualifying Children: Limited to the lesser of the remaining CTC or 15% of earned income exceeding $2,500.
• With Three or More Qualifying Children: The refundable amount is the greater of:
• The excess of Social Security taxes over the Earned Income Credit (EIC), or
• 15% of earned income above $2,500.

Form:

Use Schedule 8812 (Form 1040) to calculate your ACTC eligibility and maximize your refund.

Child and Dependent Care Credit

The Child and Dependent Care Credit provides additional tax relief to parents or guardians covering caregiving expenses for dependents while working or seeking employment.

Eligibility Requirements:

1. At least one qualifying dependent must live with you for more than half of the year.
2. You must pay caregiving expenses for:
• A dependent child under age 13, or
• A spouse or dependent physically or mentally incapable of self-care.

Credit Amount:

• You can claim up to 35% of qualifying caregiving expenses.
• Maximum Allowable Expenses:
• $3,000 for one dependent.
• $6,000 for two or more dependents.

Credit Percentage by Adjusted Gross Income (AGI):

AGI Range	Credit Percentage
Up to $15,000	35%
$15,001 - $43,000	Reduced by 1% per $2,000 increment
Over $43,000	20%

Filing Requirements:

• File Form 2441 with your tax return.
• Provide caregiver’s name, address, and Taxpayer Identification Number (TIN).
• Include the TIN or Social Security Number (SSN) of each dependent.

Pro Tip:

If adopting, apply for an Adoption Taxpayer Identification Number (ATIN) if the child’s SSN is not available.

Qualified Expenses for the Child and Dependent Care Credit

Eligible Expenses:

• Expenses directly related to caregiving to enable gainful employment.
• Includes household services and dependent care costs.

Ineligible Expenses:

• Food, clothing, or education (unless inseparable from caregiving costs).
• Payments made to a spouse, a dependent, or a child under age 19.

Key Considerations:

• Expenses must be incurred during the tax year for which the credit is claimed.
• Out-of-home care services must meet additional requirements if using a dependent care center.

Why Choose NSKT Global?

Navigating complex tax benefits like the Child Tax Credit, ACTC, and Dependent Care Credit requires expert guidance. At NSKT Global, we offer tailored solutions to help you maximize your tax benefits. With cutting-edge technology and personalized advice, we simplify the process to ensure compliance and financial success.

Choose NSKT Global for clarity, accuracy, and peace of mind in managing your taxes. Contact us today to unlock your financial potential.