(DailyDig.com) – Raising a child in the U.S. can cost upwards of $17,000 annually. Your family may still qualify for the child tax credit, which offers relief from the rising cost of living.
Here’s everything you need to know about the child tax credit.
What is Child Tax Credit?
The child tax credit refers to an income tax credit for eligible parents with children under the age of 18.
The child tax credit helps American families who qualify for the economic relief program. It promotes economic sustenance and reduces the income volatility that many families face. Since 2020, about one in three families with children and about one in two minority households-have experienced economic hardship, including the inability to provide food and shelter.
Such income instability affects children’s education, health, and future income. However, recent child tax credit increases provide economic relief to families with low and unreliable incomes.
How Much It Is
The tax credit was established under the Taxpayer Relief Act of 1977 and helps eligible families with children as dependents receive up to $2,000 per child.
Initially, the child tax credit provided a credit of 15 cents per $1,000 of income in the first $3,000 of income. Families were eligible for a tax credit of $500 per child. However, the tax credit amount has increased over the years to $2,000.
In 2021, the American Recovery Act partially expanded the child tax credit to help families in difficult economic situations. The credit was increased from $2,000 – $3,000 per child over age six and $3,600 per child under age six. In addition, the age limit for eligible children was raised from 16 – 17 years.
Who is Eligible for the Child Tax Credit?
The child tax credit is available for American families with children under the age of 17. You’ll need to prove that your income falls below a certain threshold to qualify for the tax credit.
You can claim their child tax credit if:
- You have lived with a child under 17 years for more than half the year.
- Your child has a social security number. If the child has only an ITIN, they aren’t eligible.
- You’re single and have an annual income of less than $75,000, or earn less than $112,500 and must pay taxes as head of your household.
- The total annual income of the parents is less than $150,000.
- You must be related to the child as a son, daughter, adopted child, stepchild, half-sibling, step-sibling, younger sibling, or a government-approved foster child.
Eligibility requirements and procedures may be different for individuals living in states with their own child tax credit programs. In such cases, families can check with their state tax agencies to determine their eligibility for the child tax credit.
Why It Was Designed
The child tax credit was designed to help lower the cost of raising children for millions of Americans.
How to Claim the Child Tax Credit
Parents and caregivers may claim the child tax credit on their income tax return (Form 1040, 1040- SR, or 1040- NR). The Social Security number and name of each qualifying child must be included on the parent’s tax return.
In addition, commencing 2015, parents and caregivers can file Form 8862 if the IRS reduces or denies the child tax credit.
If economic conditions worsen, parents and caregivers can file for the child tax credit. This tax credit provides economic relief and helps parents provide food, shelter, and education for their children.
However, you must check with federal and state tax authorities to ensure you qualify. Different states have different tax credit qualification programs. If you don’t know how to proceed, contact delegated public and private agencies for help.
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