Who wants extra deductions in taxes?
Of course, everyone!
Here are one such gem tax reductions coming your way in 2023.
Tax credits are categorised as rebates rather than deductions, however, the work remains the same, with benefits to income holders in both the cases.People do use such terms interchangeably.
Having a handsome salary but remaining at the same standard of living is a big issue that arises due to the heavy taxation that comes along with a large salary package. The US government has bought in new rules beneficial for the income earners having children. Let us understand what covers the child tax credit 2023.
What is child tax credit 2023 ?
The child tax credit is a form of rebate that income earners get if they have children’s responsibilities below the age of 17 years. This system of the tax credit is incremental, however, if your adjusted income rises above a certain dignified level, the incremental rates of tax credit start reducing.
As important as filing an income tax return, a much more important part is to prove that you have children below the age of 17 years.
The term child tax credit is also known as the CTC. This is a specific tax credit that is aimed at reducing the tax burden on parents with children’s responsibilities and therefore leaving them with more disposable income.
Eligibility for the child tax credit 2023
The eligibility criteria in the taxation system is always complex, however, the child tax credit is aimed at simpler and more useable forms of income enrichment.
Let us see if you can qualify for a child tax credit !
Depending on how much your income exceeds that limit, the credit gradually decreases until it is no longer available.
Calculation of child tax credit
The calculations are simply put forward along with the number depending on the children and the threshold income. The threshold for modified adjusted gross income to claim a full child tax credit of $2,000 per child is $4,00,000 for a joint claim by a married couple and $2,00,000 by individual filers.
Any income below or up to the threshold limit is eligible for a full child tax credit.
However as the income rises above the threshold limit, the amount of tax credit per child decreases. The amount of tax credit per child decreases by $50 as and when the modified adjusted gross income rises by every $1,000.
The child tax credit 2023 is a partially refundable tax credit, which means that it can lower your tax bill dollar for dollar and that you can be eligible for a tax refund of up to $1,500 for any balance that remains after deductions.
The Income tax return refers to this partially refundable amount as the “additional child tax credit.”
Claiming and refund process
The child tax credit can be claimed on Forms 1040 or 1040-SR. Schedule 8812, which is submitted with your 1040, must also be completed.
You can use this plan to determine how much of the partial refund you may be eligible for, if any, and how much of the child tax credit you will be eligible for.
Most high-quality tax preparation software walks you through the process of claiming the child tax credit with a series of interview questions, making it simpler and even automatically filling out the papers for you.
Automation thus helps in precision and careful estimation and planning.
As per the taxation agency, people who filled the income tax returns early and selected deposit as a refund process with a zero error can expect the refund for 2022, in mid-February 2023.
Read More : Recurring Deposits