Many tax filers claiming the Child Tax Credit (CTC) this year are surprised to see their refund payment much lower than expected.
This is mainly due to the widely claimed tax credit resetting from a pandemic boosted maximum of $3,600 to $2,000 per child in 2022 and 2023.
Another reason is that they are not paying attention to the minimum earnings requirement ($2,500) to get the any portion of the tax credit. This minimum was also waived during the 2020 and 2021 pandemic tax years.
Also it is important to note the difference between the ACTC (additional child tax credit) vs CTC. The ACTC is essentially the refundable part of the CTC, worth up to $1,500. You can get this refundable amount even if you have no tax liability.
The full amount of the credit can be claimed when a taxpayers AGI reaches $23,000/$29,000 (singles/married filing jointly) up to the preset income thresholds.
The remaining or non-refundable $500 component of the CTC can only be applied against or deduct your tax liability.
If you don’t have a tax liability (e.g. if you make less than the standard deduction) you will only be eligible for the refundable or ACTC component of the child tax credit.
For example, Mary is a single mother with two children earning $24,500 and has no tax liability. She will receive a refund of $1,500 for each of her two children (15 percent of $22,000, up to the $1,500 maximum). But she won’t get the non-refundable CTC deduction of $500 for each child since she has no tax liability.
Also note that if your one your claimed dependent(s) turned seventeen during 2022, they would not be eligible for the CTC since the qualifying age requires them to be under 17 at the end of the year.
The child tax credit can be claimed in addition to the other dependent based credits like the Earned Income Tax Credit (EITC, $500 Other Dependent Credit (ODC) and Child and Dependent Care Tax Credit (CDCTC).