Tax Breaks for Growing Families
Whether you’re planning to have kids, have just become a parent, or are thinking about down the road, it’s important to explore the financial tools available to support you on this exciting journey. In this article, I will shine a spotlight on the Child Tax Credit—a valuable resource designed to provide financial relief for growing families.
The Child Tax Credit is a game-changer for new parents, offering a substantial credit per child to directly reduce your tax liability. For the 2023 tax year, the credit is $2,000 per qualifying child, with the refundable part of the credit being worth up to $1,600 per child.
Eligibility Criteria: Who Qualifies for the Credit – To benefit from the Child Tax Credit, you must meet specific eligibility criteria. To qualify, the child must be under the age of 17 at the end of the tax year, a U.S. citizen, and claimed as a dependent on your tax return. Dependents include children, stepchildren, eligible foster children, siblings, and descendants of one of these like a grandchild, niece, or nephew.
How the Child Tax Credit Works: The mechanics of the Child Tax Credit are relatively straightforward. For each qualifying child, you can claim the specified credit amount, which directly reduces the total amount of income tax you owe. If the credit exceeds your tax liability, you may be eligible for a refundable portion of the credit. This means that, in certain cases, the credit can contribute to a tax refund.
Tax Credit Changes May Be Coming: Currently, there is a bill under negotiation that could further expand the Child Tax Credit for the 2023 tax year. If passed, the bill would increase the refundable portion of the credit to $1,800 for 2023 tax returns, increasing to $1,900 for 2024 and $2,000 for 2025. With the IRS’s opening day for tax season being January 29th, Congress is under pressure to approve this bill for taxpayers to be able to utilize the increased Child Tax Credit the bill would provide.
Seeking Professional Guidance: The Role of a CPA – While the Child Tax Credit is a valuable resource, navigating the intricacies of tax laws can be complex and are ever-changing. Seeking guidance from a Certified Public Accountant can provide personalized insights into your family’s specific situation including exploring other tax credits and deductions and future tax planning.
The Child Tax Credit stands as a financial ally for growing families, offering substantial relief, and acknowledging the financial responsibilities that come with raising children. Here’s to a future filled with joy, financial well-being, and countless cherished moments!
Published in the Victoria Advocate
Megan Williams, CPA is a senior staff accountant for Keller & Associates CPAs, PLLC.
