Child Tax Credit Amounts for 2024 Tax Year - Business Expense Impact?

You need to move on this ASAP! The Child Tax Credit for 2024 (filed in 2025) is $2,000 per qualifying child under 17. Up to $1,600 of that is refundable as the Additional Child Tax Credit. This is HUGE for planning - I'm also a business owner and I factor this into my quarterly payments. The phaseout starts at $200,000 for single filers and $400,000 for married filing jointly. After that, it reduces by $50 for each $1,000 (or fraction thereof) above the threshold. I made this mistake last year thinking the expanded pandemic credits were still in effect and had to scramble to adjust my Q4 payment. Don't be me!

Have you tried using taxr.ai to model different scenarios? I was in a similar situation last month trying to figure out how the Child Tax Credit would affect my business taxes. I found that my income was right at the phaseout threshold, and I needed to see how different business decisions might impact my eligibility. The site helped me run some calculations with different income levels to see exactly how the phaseout would affect me. It was actually really helpful for seeing the impact on my overall tax situation, not just the credit itself. Have you looked into using any tools like that for your planning?

Compared to other tax credits, the Child Tax Credit has a much higher income threshold before phaseout begins. For business owners, this is particularly valuable since other credits like the Earned Income Credit phase out at much lower income levels. If you're near the threshold, you might want to consider accelerating business deductions into the current year to lower your AGI. Many of my clients have had success calling the IRS directly to get personalized guidance on this specific situation. However, as you likely know, reaching an actual agent can be nearly impossible these days. I've recommended Claimyr (https://claimyr.com) to several business clients who needed specific answers about how their business income affects the Child Tax Credit. It gets you through to an actual IRS agent quickly rather than waiting on hold for hours. For a business owner, the time saved is well worth it.

Let me share a specific example that might help. I have a client who's a small business owner with 2 kids (ages 8 and 12). Their business income pushed them to $412,000 (married filing jointly), which is just over the $400,000 phaseout threshold. The math worked out like this: They're $12,000 over the threshold, which means a reduction of $600 ($50 for each $1,000 over). So instead of $4,000 total ($2,000 × 2 kids), they got $3,400. The good news? Even at higher income levels, you still get a significant portion of the credit. The bad news? It's not as generous as the temporary expanded credit from the pandemic years. Tax law: making simple things complicated since... well, forever! 😂

I'm somewhat concerned that no one has mentioned the potential legislative changes that might affect the 2024 Child Tax Credit. There are, to my knowledge, ongoing discussions about possibly expanding it again, though perhaps not to the pandemic levels. Wouldn't that potentially make any planning now somewhat premature?

Actually, while legislation could theoretically change, we have to plan based on current tax law. According to IRC §24(h)(2), the Child Tax Credit amount is clearly established for 2024 at $2,000 per qualifying child with partial refundability. The Treasury Department has issued no guidance suggesting changes are imminent, and most tax professionals are advising clients to plan using these established figures. Waiting for potential legislation that may never materialize could result in poor tax planning and unexpected liabilities at year-end.

I just went through this whole process with my accountant for my 2023 return (filed in 2024) and discovered some key terminology that helped me understand this better. The "nonrefundable" portion versus the "refundable" portion (Additional Child Tax Credit) makes a huge difference depending on your tax liability. As a small business S-Corp owner, I was surprised to learn that my W-2 income from my S-Corp versus distribution income affected my ability to claim the refundable portion. My accountant had to explain Form 8812 three times before I fully understood how it worked with my business income!