The federal government offers various credits to taxpayers that they should know as they get a tax break. Additional Child Tax Credit is one such credit which is the refundable portion of Child Tax Credit claimed by US citizens who have a qualifying child.
The ACTC is a refundable credit that would increase your tax refund when you qualify for the credit. Many taxpayers claim this credit when they claim the child as a dependent in their tax return. So, with the 2025 tax season coming, taxpayers should be aware of the ACTC.
Additional Child Tax Credit 2025
The Additional Child Tax Credit or refundable portion of CTC is offered to families with dependent children to help them reduce their financial pressure. The ACTC portion is the unused portion of the CTC which matches up with the rising cost of living.
The CTC recipients receive this credit when they cannot receive the full credit, hence it comes as a great help for the taxpayers. The government supports the parents or guardians with this credit with the rising cost of raising a child as child care, education cost, and others are rising.
The 2025 tax season is just a few months away, so taxpayers should prepare well for tax returns and look into such credits so they can get their tax refund increases. The ACTC payout is processed with the tax refunds as well, just like EITC.
Who qualifies to receive the Additional Child Tax Credit 2025?
According to the IRS rules, the ACTC/ CTC are the credits for individuals who have a dependent child that meets the eligibility conditions given below:
Age:
- The child’s age must be under 17 by the end of the 2024 tax year;
Relationship:
- The child can be your son, stepchild, daughter, brother, sister, stepbrother/sister, eligible foster child, half-sister/brother, or descendant of your family, like grandchild, nephew, or niece,
Living Situation:
- The child must be living with you and you are primary responsible for the child for more than half of the tax year (2024).
Filing status:
- The child must be claimed as the dependent in your tax return only not someone’s return;
- The child must not have filed a joint return with his spouse, (if any)
Citizenship and others:
- The child must be the US national/ citizen/ US resident alien qualified category;
- The child must have a valid SSN (Social Security Number) which is issued before the 2024 tax year’s last date, that is, 15 April 2025.
- The child must not provide the support, even half the support for themselves in the 2024 tax year.
Exclusions:
- A taxpayer cannot claim the ACTC when the taxpayer or the taxpayer’s spouse filed Form 2555 (foreign earned income) or Form 2555EZ.
How much you can receive under the Additional Child Tax Credit for 2025?
According to the IRS rules for the 2024 tax year, the Child tax credit for eligible taxpayers is $2000 for each qualifying child, which is a non-refundable portion, whereas, under the refundable portion, taxpayers can receive a credit up to $1700 per qualifying child.
The Tax Cuts and Jobs Act has increased the CTC amount to $2000 from $1000 and set a limit to the refundable portion. Last year, the ACTC was $1600 for each qualifying child which has increased this year.
A tax credit like ACTC becomes a tax refund when the credit amount is greater than the taxes you owe to the agency, for instance, if your tax bill is $5000 and your tax credit is $5500, you will receive a refund of $5500 – $5000 = $500.
How does your income affect your ACTC Credits?
The adjusted gross income affects the ACTC/ CTC credit of the taxpayers just like other credits, hence, the taxpayers have to get a clear idea of the income threshold for such credits. According to the IRS rules, the CTC/ ACTC would be decreased if the income limit goes above the following limit:
- For individual filers, the ACTC/ CTC income should not exceed the $200,000 limit, otherwise, it will be reduced;
- For married filing jointly, the ACTC/ CTC income should not exceed the $400,000 limit
Last time the phaseout limit for the ACTC/ CTC was $75,000 for individuals and $110,000 for married but filing jointly taxpayers, however, this year the IRS has increased the limit to ensure more people can receive the credits.
Hence, the IRs encouraged taxpayers to file their tax returns even if they have no income to report as they may receive such credits as tax refunds from the agency.
How can you claim the Additional Child Tax Credit 2025?
The taxpayer who meets the ACTC/ CTC eligibility conditions and wishes to claim the credit can file their tax return in 2025 before the last date, 15 April 2025 with Schedule 8812. The Schedule 8812 with the tax form is necessary as it is associated with Credits for Qualifying Children and Other dependents.
The Form has the ACTC section in Part II-A where you can enter all the details and claim the credit for the qualifying child. The taxpayers are advised to file their claim online as it is much faster and more convenient. The IRS has many electronic methods, such as IRS Direct File or Free File, etc. that taxpayers can check and file their tax returns.
The ACTC claimants can expect a little delay in their tax refund as under the PATH Act, the agency cannot process such credits before 15 Feb of the tax year. The restriction is to stop the fraudulent activities in such credits, hence in 2025, you can expect your ACTC refund after 27 Feb 2025 (direct deposit) or the first week of March 2025 (paper check).
The ACTC is a refundable credit that comes in your tax refund, hence taxpayers with no tax liability who meet the ACTC eligibility condition should file their tax return and receive this credit.