Published on Apr 26, 2024 5 min read

Why Your Child Tax Credit is Lower than Expected: A Simple Guide

The child tax credit is a particular gift from the government that assists families with children. It's designed to support parents in caring for their children by providing a little additional support. However, parents occasionally receive a smaller child tax credit than they had anticipated. Here are the most common causes of the discrepancy between the amount you received and your expectations, along with a few possible solutions. Keep on reading this article if you are interested!

What is meant by Child Tax Credit?

For individuals with dependent children of seventeen years, the child tax credit is a deferred tax benefit. The government provides parents with money for dependent children through the child tax credit. It is possible for the credit to completely eliminate your tax liability by reducing it on a dollar-for-dollar basis. Additionally, some taxpayers may qualify for the additional child tax credit, which offers a partial return of the benefit.

Eligibility standards for people and their children take into account the child's age and relation to the person filing the claim, among other factors. In addition, in order for individuals to receive the full benefits of the program, they must meet income requirements, as the financing phases off for those with high salaries.

How to Claim the Child Tax Credit?

Some low-income individuals choose not to file taxes because they are aware that they owe nothing. That could be incorrect for a number of reasons. Except for those with the lowest incomes, everyone must file a tax return. More significantly, though, it's possible that you're passing up some worthwhile advantages for which you qualify.

If you are a family man, one of these is the child tax credit, which, when paired with the additional child tax credit, is partially refundable. This implies that even if you have no outstanding taxes, you can still get some of it back.

A taxpayer must submit Form 1040, which is a U.S. individual income tax return form, in order to be eligible for the child tax credit. Schedule 8812 must also be attached by the taxpayer. To determine how much child tax credit a taxpayer is qualified to receive, utilize Schedule 8812.

Reasons for Lower Child Tax Credit Payment

The Child Tax Credit may be lower than you intended for a few reasons.

Changes in Child Dependents

Your child tax credit may be impacted if your family's circumstances change. Over the duration of a year, your family's size can change. Newborns, adoptions, children reaching eighteen custody agreements, and, sadly, death can all affect how many individuals in your family are eligible for the credit.

Changes in Income

Changes in the maximum number of dependents you can claim, as well as any significant adjustments to your taxable income, will not be taken into consideration. Parents who saw a significant gain or fall in their income may find this to be a very confusing situation.

Compared to previous years, the maximum income that parents can earn and still qualify for the child tax credit is significantly lower. If a married couple filing jointly earns less than 150 thousand dollars, they will receive the full credit, while heads of household, which includes the majority of single parents, will receive $112,500.

Child Ages Out of Eligibility

According to the increased child tax credit legislation, children under the age limit of six can receive a total of $3,600, of which half will be paid as $300 monthly advance payments.

Teens who will turn 18 before the year is out are similarly eligible, although they are not eligible for the child tax credit in this case. They will still, however, be eligible for a five hundred dollar one-time credit for parents whose dependents are college students between the ages of 19 and 24 or 18 years old.

Changes in Tax Laws

The government periodically modifies the regulations governing who is eligible for the child tax credit and how much they can receive. The child tax credit amount that you receive may change as a result of these modifications. The amount of money you receive from the child tax credit may be impacted by errors on your tax return. For instance, you can receive less money or none at all if you inadvertently provide incorrect details about your earnings or your children.

Cohabiting Parents

The percentage of single parents who live together is about 35%, but tax legislation hasn't kept up with these trends as much. While cohabiting offers greater financial security than single living, it excludes you from married couples' tax advantages.

Even if you share parenting duties and financial obligations equally, only one of you is eligible for the child tax credit, and even then, only if their salary is less than $112,500 in order to receive the full amount. Therefore, the reason your monthly payments are less than anticipated could be that you earned twelve thousand dollars last year while your spouse was a stay-at-home parent.

What to do if Your Child Tax Credit is Smaller than Expected?

Review your income tax return. Verify that your tax return is free of errors that can have an impact on the child's tax credit. You can file a modified tax return and fix any problems you find. Communicate with a tax expert. You can consult a tax expert if you're unsure of the reason behind your child tax credit being less than you expected. They can assist you in assessing the situation and determining the best course of action.

Conclusion

To sum up, one useful tool the government uses to assist families with children is the child tax credit. For each qualifying dependent kid, the child tax credit is worth two thousand dollars if your adjusted gross income for the year is 400 thousand dollars or less.

The child tax credit you receive, however, might not always be as much as you expected. You can make sure that you receive the amount you need to take responsibility for your family by being aware of possible causes of this and the measures that you can take to prevent it.