The proposed enhancement to the child tax credit, which has been approved by the House of Representatives, would operate distinctively compared to the modification implemented in 2021.
According to estimates by the Center on Budget and Policy Priorities, approximately 16 million children from low-income households would experience advantages from the augmented credit within the initial year.
This credit enhancement is included as a component of a broader tax legislation that also encompasses the extension of certain business credits.
Proposed Changes to the Child Tax Credit in 2024
The proposed revisions to the $2,000 child tax credit would be applicable over three tax years: 2023, 2024, and 2025.
This signifies that individuals could avail themselves of the expanded credit during this tax season when filing their 2023 tax returns.
The child tax credit would persist in being partially refundable, enabling individuals to receive a refund for a portion of the credit even if they do not owe any tax.
Under the new regulations, the maximum refundable amount would increase from $1,600 per child.
For the tax year 2023, it would rise to $1,800; for the tax year 2024, to $1,900; and for the tax year 2025, to $2,000.
The amounts for 2024 and 2025 would be subject to adjustment for inflation.
The portion of the $2,000 credit remaining after the refundable amount ($200 for tax year 2023) would be nonrefundable, signifying that individuals could solely utilize the tax credit to offset taxes owed—once their tax liability reaches zero, they would not receive any additional funds.
Eligibility for the New Child Tax Credit
The eligibility criteria for the new credit closely mirror those of the existing non-pandemic child tax credit.
To qualify for the tax benefit in the current year, you and your family must meet the following conditions:
- Your modified adjusted gross income (MAGI) must not exceed $200,000, or $400,000 if filing jointly.
- The child you intend to claim the credit for must have been under the age of 17 as of December 31, 2023.
- The child must have a valid Social Security number.
- The child must be your legally recognized child, stepchild, foster child, sibling, half-brother, half-sister, or a descendant of one of these categories (e.g., grandchild, niece, or nephew).
- The child must not have provided more than half of their own financial support during the applicable tax year.
- The child must have resided with you for more than half of the year.
- You must claim the child as a dependent on your tax return.
- You must be a resident alien or a citizen of the United States.
Under the newly enhanced credit, the maximum refundable amount per child would be $1,800 for the tax year 2023, $1,900 for the tax year 2024, and $2,000 for the tax year 2025.
This adjustment enables lower-income families to access a greater portion of the refundable segment of the credit.
In contrast, under the previous tax provision, the maximum refundable tax credit per child was $1,600.
