Difference between the child tax credit and other dependent credit
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Table of Contents
What is the difference between the CTC and Other Dependent Credits?
The Child Tax Credit (CTC) gives parents up to US$2,000 per child under 17, while the Credit for Other Dependents (ODC) provides up to US$500 for dependents who don’t qualify for the CTC.
The CTC is partially refundable (through the Additional Child Tax Credit), meaning some families can get money back even if they don’t owe taxes, while the ODC only reduces the amount of taxes you owe.
The income limits for the CTC are also higher than those for the ODC, meaning more families qualify for it.
What is the Additional Child Tax Credit (ACTC)?
The Additional Child Tax Credit (ACTC) is a refundable tax credit that helps families who don’t owe enough taxes to claim the full Child Tax Credit (CTC). You can only get the ACTC if you qualify for the CTC.
This means that if your tax bill is low or zero, you might still get some money back.
Expats can qualify, but they must have earned income and cannot use the Foreign Earned Income Exclusion (FEIE), which allows them to exclude foreign income from US taxes.
If you exclude all your income with the FEIE, you won’t be able to get the ACTC (US$1,700 for 2024).
Who qualifies for the Child Tax Credit?
The Child Tax Credit (CTC) is a tax benefit designed to help parents offset the cost of raising children by reducing their tax bill or providing a partial refund. For 2024, the CTC allows parents to claim up to US$2,000 per child, with up to US$1,700 refundable (ACTC).
To qualify, the child must:
- Be under 17 by the end of the year
- Be your biological child, stepchild, foster child, or a close relative (like a grandchild or niece)
- Have lived with you for more than half the year
- Be a US citizen, national, or resident
- Have a Social Security Number
How does the Child Tax Credit affect my taxes?
The CTC reduces the amount of taxes owed. If your tax bill is smaller than the total credit amount, you may receive a refund of up to US$1,700 per child through the Additional Child Tax Credit (ACTC).
How does income impact the credit amount?
Your Modified Adjusted Gross Income (MAGI) determines how much of the CTC you can claim. The credit begins to phase out if your income exceeds US$200,000 (or US$400,000 for married couples filing jointly). This means that if you earn above these thresholds, the credit amount is gradually reduced.
How can expats claim the CTC?
US citizens living abroad can still claim the CTC, but if they use the Foreign Earned Income Exclusion (FEIE) to exclude all their foreign income, they cannot claim the refundable portion of the credit.
To receive the refund, expats must report earned income that is taxable under US law.
How did the American Rescue Plan Act (ARPA) impact the CTC?
In 2021, the ARPA temporarily expanded the CTC to provide advance monthly payments and increased the credit amount. However, these changes have expired, and the 2024 credit follows the pre-2021 rules.
Get an estimate on how much Child Tax Credit Refund you can claim today.
What is the Credit for Other Dependents, and can US expats claim it?
The Credit for Other Dependents (ODC) is a tax credit for those who support dependents who do not qualify for the Child Tax Credit. This includes children who are 17 or older, elderly parents, or other relatives who rely on financial support.
The ODC provides up to US$500 per dependent and is nonrefundable, meaning it only reduces the amount of tax owed and does not provide a refund.
Who qualifies for the ODC?
To claim the ODC, the dependent must:
- Be a US citizen, US national, or resident alien
- Have a valid Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN)
- Not be eligible for the Child Tax Credit
- Receive more than half of their financial support from you
- Have income below the dependent exemption income threshold (US$5,050 in 2024)
How does the ODC help taxpayers?
The ODC benefits taxpayers who have dependents that do not meet the requirements for the CTC. This includes college students, disabled adults, or elderly parents living with you.
Unlike the CTC, the ODC only reduces your tax bill—it does not result in a tax refund.
How can expats use the ODC?
Expats can claim the ODC for qualifying dependents, but just like with the CTC, if they exclude all their foreign income using the FEIE, they will not be eligible for this credit.
The ODC requires taxable earned income to be applicable.
How did the Tax Cuts and Jobs Act (TCJA) impact the ODC?
The Tax Cuts and Jobs Act (TCJA) expanded the ODC to include more dependents who do not qualify for the CTC. The US$500 credit was introduced as part of this act and is set to remain in place through 2025 unless Congress makes further changes.
How is the Child Tax Credit different from the Credit for Other Dependents?
Both credits help families, but they work differently:
- Who Qualifies: The Child Tax Credit is for children under 17, while the Credit for Other Dependents is for older children, parents, or other relatives.
- Amount: The Child Tax Credit gives up to US$2,000 per child (with up to US$1,700 refundable with the ACTC), while the Credit for Other Dependents is US$500 per dependent and nonrefundable.
- Refundability: The Child Tax Credit can give you money back, while the Credit for Other Dependents can only reduce the amount of taxes you owe.
Who qualifies as a dependent for tax credits?
To claim tax credits like the Child Tax Credit (CTC) or the Credit for Other Dependents (ODC), the person must be your dependent. There are two types of dependents: Qualifying Children and Qualifying Relatives.
A Qualifying Child must:
- Be your child, stepchild, foster child, sibling, or their descendant (like a grandchild or niece)
- Be under 19 (or under 24 if a full-time student) at the end of the year
- Live with you for more than half the year
- Rely on you for most of their financial support
- Be a US citizen or resident with a valid Social Security Number
A Qualifying Relative must:
- Not be a Qualifying Child
- Be a close relative (such as a parent, grandparent, or sibling) or live with you all year
- Earn less than US$5,050 in the tax year (for 2024-2025)
- Be financially supported by you (you must provide more than half of their living costs)
Where can you get help with claiming the right tax credit?
If you’re unsure which tax credit you qualify for, help is available:
- IRS Tools: The IRS website has online tools that can help you figure out if you qualify for tax credits.
- Tax Professionals: Accountants or tax preparers can help you file correctly and make sure you get the credits you qualify for.
- Free IRS Assistance: The IRS offers help through programs like Volunteer Income Tax Assistance (VITA) for those who meet income requirements.
How does divorce or separation affect tax credits for dependents?
When parents are divorced or separated, tax credits for children depend on custody and agreements between parents.
- Custodial Parent: The parent who has the child for most of the year usually claims the Child Tax Credit.
- Noncustodial Parent: If the custodial parent signs Form 8332, they can allow the noncustodial parent to claim the credit instead.
- Shared Custody: If both parents share custody, only one can claim the credit each year. Parents may agree to take turns claiming the credit.
How do you file taxes and claim the right credit?
To claim tax credits for dependents, follow these steps:
- Check Eligibility: Make sure your child or dependent meets the rules for either the Child Tax Credit or the Credit for Other Dependents.
- File Your Tax Return: Use Form 1040 to report your income and claim credits.
- Include Schedule 8812: If you’re claiming the Additional Child Tax Credit, this form is required.
- Keep Records: Have documents like birth certificates, proof of residency, and financial support records in case the IRS requests them.
- Consider E-Filing: Filing online reduces errors and speeds up refunds.
