Unlock Extra Savings with the Additional Child Tax Credit (ACTC): Who Qualifies and How It Works
Discover the benefits of the Additional Child Tax Credit (ACTC), the refundable portion of the Child Tax Credit revamped under recent tax laws, and learn if your family qualifies for this valuable tax refund opportunity.
Understanding the Additional Child Tax Credit (ACTC)
The Additional Child Tax Credit (ACTC) is the refundable segment of the Child Tax Credit, designed to help families receive a refund on unused portions of their child tax benefits.
What Exactly Is the ACTC?
The ACTC allows eligible taxpayers to claim a portion of the unused Child Tax Credit as a refund, providing financial relief beyond just reducing tax owed. While the Child Tax Credit reduces your tax bill, any leftover credit typically isn’t refundable. The ACTC changes that by turning some of that unused credit into money back in your pocket.
Key Highlights
- The ACTC is the refundable part of the Child Tax Credit.
- For the 2024 and 2025 tax years, the credit can be worth up to $1,700 per qualifying child.
- Income thresholds apply to both the Child Tax Credit and ACTC.
- Children must be under 16 years old to qualify.
- Each child must be claimed as a dependent on your tax return.
How Does the Additional Child Tax Credit Work?
To claim the ACTC, eligible taxpayers must complete Schedule 8812 and attach it to their Form 1040 tax return. This process enables you to receive a refund on unused Child Tax Credit amounts, up to $1,700 per child for 2024 and 2025.
This $1,700 represents 85% of the $2,000 maximum Child Tax Credit available per child during these years. For families with multiple children, the refundable credit can add up—for example, up to $5,100 for three qualifying children.
However, income limitations apply: the credits begin to phase out at adjusted gross incomes (AGI) of $200,000 for single filers and $400,000 for married couples filing jointly. Additionally, taxpayers who exclude foreign-earned income by filing IRS Form 2555 are ineligible for the ACTC.
Recent Legislative Updates
The Child Tax Credit was established in 1997 by the Taxpayer Relief Act, with the refundable ACTC introduced in 2001 under the Economic Growth and Tax Relief Reconciliation Act. While initially temporary, the ACTC has become a permanent feature.
The 2017 Tax Cuts and Jobs Act increased the Child Tax Credit from $1,000 to $2,000 and raised income thresholds to current levels, benefiting millions of families.
In February 2025, the IRS announced that Puerto Rican residents could qualify for the ACTC with just one qualifying child, a change from the previous requirement of three children. Tax refunds including the ACTC are expected to be issued starting mid-February 2025.
Are You Eligible for the Additional Child Tax Credit?
To qualify for the ACTC, you must first be eligible for the Child Tax Credit and have a tax liability that leaves unused credit available for refund.
Your qualifying child must be under 16 at the end of the tax year, be a U.S. citizen, national, or resident alien, and possess a valid Social Security number. You must claim the child as a dependent on your tax return, and they must have lived with you for more than six months during the year. The child cannot have provided more than half of their own financial support, and must be related to you, including stepchildren.
The child’s Social Security number must be valid for employment and issued before your tax return filing deadline (including extensions, which may extend to October).
Final Thoughts
The Additional Child Tax Credit offers valuable financial support to many families, especially those with multiple children, by turning unused tax credits into refunds. While high earners may see reduced benefits due to income limits, the ACTC remains a crucial resource for many households.
Ensure you claim both the Child Tax Credit and ACTC when filing your taxes to maximize your refund and ease your financial burden.
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