In the US, the Tax Credit is a very important way to help families, especially those with kids, with their money problems. With this benefit, taxpayers can lower their obligations to lawyers, which can save them a lot of money.
At the moment, families can get up to $2,000 for each child under 17 years old. Dependents older than 17 also get extra help.
This program has been important since the beginning, but recent changes have made it more useful and expanded the benefits it offers, most notably by making the credit portion more refundable.
This makes the Tax Credit even better for low-income families who qualify. Also, by 2025, big changes are likely to be made to the current rules, which will affect both the amounts and who is eligible.
However, a big question comes up for a lot of people: can families use this benefit while also getting other help, like Social Security retirement?
To get a better sense of what is going on, it is helpful to look at the Tax Credit is requirements and conditions, as well as how it works with other U.S. benefits.
How do I get the Tax Credit?
People who meet certain requirements and have children younger than 17 can get a tax credit called the Child Tax Credit (CTC).
It lets you get a credit of up to $2,000 for each child who is eligible, and you can get back up to $1,600 if the credit is more than the tax you owe.
Also, older dependents who meet certain requirements, like students ages 19 to 24 or seniors, may get a $500 credit that they can not get back.
Major CTC requirements:
- Children under age 17 who are citizens or legal residents of the United States.
- Adjusted gross income not exceeding $200,000 for single parents or $400,000 for married couples.
- For families with lower incomes, the refundable portion (ACTC) is limited to a percentage of earnings above $2,500, meaning that those who work less or earn less than this amount may not qualify.
It is important to keep in mind that this credit does not fully adjust for inflation; the refundable part does, but it does do so gradually. This amount will go up to $2,000 by 2030. For now, it is only $1,600.
Since 2018, there has been an extra $500 credit for dependents who do not qualify for the main credit. This includes teenagers over 17 or adults who depend on you.
This change made the program more inclusive, helping families that did not qualify before because of the old rules.
Starting in 2025, the credit will go back to how it was before the 2017 tax reform. This will mean that the benefits will be much smaller. Before the changes go into effect, families should get ready for them and think about how to best use the credit.
Can I have Tax Credit and collect Social Security retirement?
A question that comes up a lot is whether the Tax Credit can be used with Social Security retirement payments. The short answer is that you can usually get both benefits as long as you meet the requirements of both programs.
The Tax Credit is mostly for families with children or other dependents. Social Security, on the other hand, is based on earned income from working a lifetime. But there are some things to think about:
- Minimum income: to claim the refundable portion of the CTC (ACTC), you need to have earned at least $2,500 during the tax year. This can be a hurdle for retirees with low income or no recent work activity.
- Tax Impact: Social Security payments generally do not affect eligibility for the Tax Credit, but retirees should make sure their adjusted gross income does not exceed the limits established for the credit.
It is very important to keep in mind that the Tax Credit and Social Security are two different programs with different goals and rules. Families that are combining both benefits should talk to an attorney to make the most of the benefits they can get.
For families, especially those with children or other dependents, getting the most out of the Tax Credit can make a big difference.
With changes coming in 2025, it will be important to plan ahead to make sure you can still get the benefits you are getting now before they are cut back.