Child Tax Credit Expansion: Should You Wait to File Your Taxes?
If you’re a parent planning to claim the child tax credit this year, you may wonder whether you should wait to file your taxes until a decision is made on a potential child tax credit expansion. We have the latest information on what’s happening and what you should do.
What is the Child Tax Credit?
The child tax credit is a tax break that partially refunds the credit, which means you can get a refund for part of the credit even if you don’t owe any tax. The remaining part is nonrefundable, so you can only use it to pay off taxes you owe.
To be eligible for the child tax credit this year, you and your family must meet specific requirements, such as having a modified adjusted gross income (MAGI) of $200,000 or less or $400,000 or less if you’re filing jointly. The child you’re claiming the credit for must have been under the age of 17 on Dec. 31, 2023, have a valid Social Security number, be your legally recognized child, stepchild, foster child, sibling, half-brother or half-sister, or a descendant of one of these categories, have contributed no more than half of their financial support in the relevant tax year, have lived with you for over half the year. You are claiming them as dependents on your tax return. You must also be a US citizen or resident alien. If your MAGI exceeds the income limits, the child tax credit you receive will decrease by $50 for every $1,000 above the limit.
What is the Potential Child Tax Credit Expansion?
Congress temporarily expanded the child tax credit in 2021 as part of a massive COVID-19 aid package, which helped drive child poverty to a record low. However, Congress didn’t extend the expanded credit in 2022, and the credit returned to its pre-pandemic rate.
If approved, the new rules around the $2,000 child tax credit would cover three tax years: 2023, 2024, and 2025, and would be more modest. If approved, you could claim the expanded credit this tax season when you file your 2023 tax returns.
As proposed, the new child tax credit would continue to be partially refundable, and the new rules would increase the maximum refundable amount per child from $1,600 per child to $1,800 in the tax year 2023 to $1,900 in the tax year 2024 and to $2,000 in the tax year 2025. The remainder of the $2,000 after the refundable amount would be nonrefundable, so you could use the tax credit only against taxes you owe.
Should You Wait to File Your Taxes?
Once the legislation is signed into law, it’s uncertain whether the Senate will approve it. So, if you’re wondering whether you should hold off on filing your tax return, it’s best to wait until the situation becomes more apparent.
The maximum tax credit available per kid is $2,000 for each child under 17 on Dec. 31, 2023, and only a portion is refundable this year, up to $1,600 per child. If you’re eligible for the child tax credit this year, find out how much money you could get and when you can expect your child tax credit refund.
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