When you file your tax return, you expect to receive a refund. Three out of four taxpayers will receive a tax refund this year.
The amount of refund you get is determined by various factors, but one of the most reliable ways to get a refund or reduction is by qualifying for tax credits. The IRS will begin processing returns on Monday, 29 January. While processing has yet to begin, you can submit your return, putting you at the front of the queue. The IRS has stated that returns will be distributed around twenty-one days after the return is submitted if it is done so electronically and the taxpayer provides direct deposit information.
Two of the biggest tax credits available for families are the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Both are designed to support working individuals and families.
The EITC is a federal tax refund that can be fully refunded, which means that if your tax burden is reduced to $0, the IRS will pay you the difference. The credit can be worth nearly $7,000 if you meet all the requirements. Although having a family increases the amount you can claim, it is not aimed specifically at them.
The CTC is worth up to 15% of your income, up to $2,000, but it is not fully refundable. It is phased out at a much lower level compared to the EITC and is intended to help almost all working families in raising their children. Accessing one does not restrict taxpayers from claiming the other.
How to claim the EITC and the Child Tax Credit
There are a few qualifications necessary to claim the EITC:
Having worked and earned lower income than $59,187
Have had investment income of less than $10,300 in tax year 2022
Have a valid Social Security number
Be a US citizen or resident alien for the entire year
Not filing Form 2555 (Foreign Earned Income)
To claim the CTC:
The child must be eligible to be claimed as a dependent on the taxpayer’s return
Live at the same residence as the taxpayer for more than half the year
The child cannot provide more than half of their own financial support during the tax year
The child must have a valid taxpayer identification number in the form of a work-authorized Social Security number (SSN)
The child tax credit is a credit for having dependent children younger than age 17. The Earned Income Credit (EIC) is a credit for certain lower-income taxpayers, with or without children. If you're eligible, you can claim both credits.
The CTC is worth up to 15% of your income, up to $2,000, but it is not fully refundable. It is phased out at a much lower level compared to the EITC and is intended to help almost all working families in raising their children. Accessing one does not restrict taxpayers from claiming the other.
You or your spouse don't have a valid SSN. Your AGI is too high: your earned income and AGI exceed certain limits, you may not be eligible for the EIC. Your investment or foreign income is too high: Both scenarios disqualify you from taking the credit.
Note that it's only dependent children who can increase your EIC amount. The child has to be younger than age 19 at the end of the year, or age 24 if a student, or can be any age if disabled. Other dependents have no effect on EIC, but they can still qualify you for filing as head of household.
Claiming a child who is not a qualifying child for the EITC – This error occurs when taxpayers claim a child who does not meet all four tests for a qualifying child. This is the most common EITC error.
If you received more than $11,000 in investment income or income from rentals, royalties, or stock and other asset sales during 2023, you can't qualify for the EIC. This amount increases to $11,600 in 2024. You have to be 25 or older but under 65 to qualify for the EIC.
To qualify for the Earned Income Tax Credit, or EITC, you must: Be at least 25 years old, but not older than 65. If you're claiming jointly without children, only one person needs to meet the age requirement. Have worked and earned at least $1 in income (pensions and unemployment don't count), but no more than $63,398.
You qualify for the full amount of the 2023 Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return).
If they otherwise meet all of the requirements to claim the earned income tax credit (EITC), unmarried parents with a qualifying child may choose which parent will claim the qualifying child for the EITC. If there are two qualifying children, each parent may claim the credit based on one child.
To meet the qualifying child test, your child must be younger than you or your spouse if filing jointly and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year.
Key Takeaways. There are seven qualifying tests to determine eligibility for the Child Tax Credit: age, relationship, support, dependent status, citizenship, length of residency and family income. If you aren't able to claim the Child Tax Credit for a dependent, they might be eligible for the Credit for Other Dependent ...
Most errors happen because the child you claim doesn't meet the qualification rules: Relationship: Your child must be related to you. Residency: Your child must live in the same home as you for more than half the tax year. Age: Your child's age and student or disability status will affect if they qualify.
As a dual-status taxpayer, you may be able to claim a dependent on your tax return. In general, a dependent is a qualifying child or a qualifying relative. You may be entitled to claim additional deductions and credits if you have a qualifying dependent.
You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. Generally, you may not take this credit if your filing status is married filing separately.
You have three years to file and claim a refund from the due date of your tax return. If you were eligible, you can still claim the EITC for prior years: For 2022 if you file your tax return by April 18, 2026. For 2021 if you file your tax return by April 18, 2025.
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