Tax season is winding down, but many parents are still waiting for their refunds and wondering whether claiming the child tax credit could cause a delay. The short answer is that some refunds involving the refundable portion of the child tax credit are subject to special IRS rules, but for most filers, those delays have already passed.
The child tax credit is one of the most valuable tax breaks available to families. It allows parents to reduce the amount of income tax they owe each year based on the number of qualifying children under age 17. Depending on your tax situation, the credit can also put money directly into your pocket as part of your refund.
Under current law, the maximum credit is $2,000 per qualifying child. That amount is available to parents whose income does not exceed certain thresholds. For single filers, the credit begins to phase out once adjusted gross income reaches $200,000. For married couples filing jointly, the phaseout begins at $400,000. Above those limits, the credit is reduced by $50 for every $1,000 of additional income, which means higher-income families may receive a smaller credit or none at all.
What is the additional child tax credit?
The child tax credit is often described as nonrefundable, which means it can reduce the tax you owe to zero, but if the credit is larger than your tax liability, you normally would not receive the difference as a refund. However, there is a separate provision called the additional child tax credit that allows eligible families to claim up to $1,700 per child as a refundable credit.
For the 2024 tax year, the refundable portion is $1,700 per child. This is an increase from the $1,600 refundable amount that applied in 2023 due to inflation adjustments. The additional child tax credit is designed to help families with little or no income tax liability still benefit from the child tax credit. If your tax bill is zero and you qualify for the additional credit, the IRS will send you the money as part of your tax refund.
Claiming the additional child tax credit requires completing Form 8812, which the IRS uses to determine whether a taxpayer qualifies and how much of the credit is refundable. This form is necessary because the IRS must verify that the dependent children meet all eligibility requirements and that the family’s income and tax liability have been calculated correctly.
Why could the child tax credit delay your refund?
The delay risk comes from a law known as the Protecting Americans from Tax Hikes Act of 2015, often called the PATH Act. Under the PATH Act, the IRS is required to hold refunds on returns that claim either the earned income tax credit or the additional child tax credit until at least February 15. The reason for this mandatory hold is fraud prevention. The IRS uses the extra time to verify claims and ensure that refunds are not issued to people who do not qualify.
Because of this requirement, taxpayers who file early and claim the additional child tax credit may wait longer for their refunds than taxpayers who claim only the nonrefundable portion of the credit. The IRS has stated that if you file your return online, choose direct deposit, and claim the earned income tax credit or additional child tax credit, you should receive your refund by March 3 for the 2025 filing season. That date has already passed, so anyone who filed and claimed these credits should have seen their refund by now.
If you claim only the standard child tax credit, which is the nonrefundable part, you are not subject to the PATH Act hold. Since the nonrefundable credit only reduces income tax owed, it does not generate a refund on its own. Therefore, the IRS does not need to perform the same type of fraud review before releasing any associated refund.
What is the future of the child tax credit?
The current $2,000 per-child amount was established as a temporary expansion under the Tax Cuts and Jobs Act of 2017. That expansion is set to expire at the end of 2025. If Congress does not act before then, the child tax credit will revert to the permanent law value of $1,000 per qualifying child. That would represent a major cut for families, especially those with multiple children.
The child tax credit has a complex legislative history. During 2021, President Biden and Congress temporarily expanded it to $3,600 per child under age six and $3,000 per child ages six through seventeen. The credit was also made fully refundable for 2021 and was distributed in monthly advance payments. That expansion, however, ended after 2021, and the credit returned to the $2,000 level in 2022.
In recent years, lawmakers have debated whether to restore a more generous version of the credit. Some proposals have called for an increase to $3,000 or $3,600 per child, while others have focused on making the credit fully refundable so that more low-income families can benefit. As of now, no agreement has been reached, and the future of the credit remains uncertain.
Who qualifies for the child tax credit?
To claim the child tax credit for the 2024 tax year, you must have a qualifying child who meets several requirements. The child must be under age 17 at the end of the tax year. The child must also be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of one of these relatives. In some cases, an adopted child qualifies, and children placed with you for legal adoption may also qualify.
The child must have lived with you for more than half the tax year. You must also provide more than half of the child’s financial support during the year. The child cannot have filed a joint tax return with a spouse for the tax year, unless the joint return was filed only to claim a refund of withheld income tax or estimated tax. The child must be a U.S. citizen, U.S. national, or U.S. resident alien, and the child must have a Social Security number that is valid for employment before the tax return deadline.
There are also income limits that apply to the taxpayer. As noted earlier, the credit begins to phase out for single filers at $200,000 of modified adjusted gross income and for married couples filing jointly at $400,000. These thresholds have not been adjusted for inflation, which means more middle-income families may become subject to the phaseout over time.
How to avoid a delayed refund
If you have not yet filed your taxes, there are several steps you can take to avoid unnecessary delays. The most important step is to file your tax return electronically and choose direct deposit for your refund. The IRS processes electronic returns much faster than paper returns, and direct deposit eliminates the risk of a check being lost or sent to the wrong address.
You should also double-check your Form 8812 and all other tax documents before submitting your return. Errors involving Social Security numbers, birth dates, and income figures can trigger manual reviews and delay your refund. Using trusted tax software or working with a professional can help reduce the chance of mistakes.
If you are claiming the earned income tax credit or the additional child tax credit, be aware that the IRS still must wait until after February 15 to release your refund. Even though that date has passed for the current filing season, it is worth remembering for future years if you routinely claim these credits.
Tracking your refund
The IRS provides an online tool called Where's My Refund? that allows taxpayers to track the status of their refund. The tool is updated once per day, usually overnight, and shows whether your return was received, whether your refund was approved, and when the refund is expected to be sent. To use the tool, you will need your Social Security number, filing status, and the exact amount of the refund shown on your tax return.
In most cases, refunds for electronically filed returns are issued within 21 days. If you filed a paper return, expect a longer wait. The IRS also issues many refunds through prepaid debit cards, but direct deposit remains the fastest and most reliable method.
The child tax credit is a critical part of the federal tax system for millions of American families. Understanding how the refundable portion works and when the IRS is allowed to release funds can help you plan your finances and avoid unpleasant surprises during tax season. With the current credit set to expire after 2025, taxpayers should also pay attention to legislative changes that could affect household budgets in the years ahead. The credit has survived multiple changes over the past decade, and its future will depend on ongoing debates in Washington over tax policy and family support.
Source: CNET News