Why Do You Lose Child Tax Credit at Age 17
Updated on January 23, 2025
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Aya Takriti, an IRS Enrolled Agent with 11 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.
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Table of Contents
Why do you lose your child tax credit at age 17?
The Child Tax Credit’s age restrictions often surprise individuals, extending even to the Additional Child Tax Credit. Though it may appear random, the logic lies in societal norms that align 17 with the coming-of-age stage.
The underlying purpose of the CTC is to financially support families during their children’s growth and development years. Consequently, once the child reaches the age of 17, the aid provided through this credit gradually lessens.
What is the Child Tax Credit (CTC)?
The Child Tax Credit (CTC) is an assistance program initiated by the federal government to ease the financial burdens of parents and caretakers of dependent kids. Since its inception in the latter part of the 1990s, it has served as a key support system for families, mitigating the financial pressures associated with raising children.
Is there an exception to the age restriction?
While the credit typically applies to children who are under the age of 17 at the end of the year, certain situations allow for an extension of the credit to a child who is 17 or older. Here are the exceptions:
- Children with disabilities: Parents or guardians of a disabled child 17 or older may continue to receive the CTC. But there are specific rules in place, and consulting the IRS’s official guidelines is necessary for exact details.
- Full-time students: When a child is 17 but continues as a full-time student, some exceptions may come into play. Though this won’t prolong the CTC, it might open avenues for other educational-related credits or deductions.
- Adopted child care: Caring for a 17-or-older child as a relative (not as a biological or adopted parent) may allow for exceptions to claim a segment of the CTC. Similarly, there are various conditions to follow to be eligible.
Can US expats claim the Child Tax Credit abroad?
Yes! A lot of US taxpayers don’t know this, but they can claim the Additional Child Tax Credit (ACTC) abroad. This credit is refundable so they can get their money back.
For 2025, the maximum refundable credit is US$1,700 per eligible child or dependent.
How can I claim the Child Tax Credit?
Here are the requirements to be eligible to claim the CTC and ACTC:
- Your child must be under 17 years old at the end of the tax year.
- Your child must have a valid Social Security Number (SSN).
- Your child must live with you for more than half the year.
- You must claim the child as a dependent on your tax return.
- Your annual earned income should not exceed US$200,000 for single filers and US$400,000 for joint filers.
- You must have an earned income of at least US$2,500 to claim the ACTC.
Curious if you’re eligible for the Child Tax Credit refund? Let’s find out.
Are there other tax credit options to look out for?
Here’s some good news: Even if the CTC and ACTC disappear, other credits like the Credit for Other Dependents may remain accessible. Here are some of the other credits available to look out for:
- Credit for Other Dependents: A non-refundable tax credit for US citizens with dependents who don’t qualify for the CTC. For 2025, the maximum credit is US$500 per dependent.
- Education-related credits: If higher education is the next step for your 17-year-old, credits like the American Opportunity Credit or Lifetime Learning Credit may apply.
- Earned Income Tax Credit (EITC): A refundable tax credit for low- to moderate-income earners.
- Deductions for medical expenses: Incurred significant medical expenditures can be deducted for a dependent child who’s 17 or older.
- Work-related dependent care credit: This credit might apply if you have dependent care expenses while working or searching for a job.
The financial landscape when your child turns 17 can be complex, but understanding the available credits and deductions can make the transition smoother.
How can I financially prepare for the loss of Child Tax Credit?
Here are some preparations and realignments you could do for the year your child becomes 17:
- Understand the tax changes: You will lose up to US$2,000 per child in tax savings on the year your child turns 17, so it’s better to explore other tax breaks to minimize your tax liability.
- Save for future plans: You can start to open a tax-advantaged account or plan, like a 529 savings account or a Roth IRA, so you can acquire tax advantages and savings opportunities in the future.
- Consult a tax professional: It’s always wise to consult a tax professional specializing in these areas to ensure you’re leveraging all the benefits and credits within your reach.
- Stay organized: Fine-tuning your withholdings can mitigate unexpected year-end surprises. This might be an opportune moment to rethink your withholding adjustments, as the Child Tax Credit’s absence can affect your total tax responsibilities.
Tax planning extends beyond mere calculations; it involves foresight and readiness. The shift in your tax situation may prompt an overall reevaluation of your financial situation. So, it’s better to be prepared for any financial distress that may come your way.
Are there considerations for non-resident parents?
Even non-resident parents will lose the benefit of the CTC once their child reaches 17, creating a complicated interplay between child support agreements and legal stipulations.
Claiming the Child Tax Credit as a non-resident parent alone already requires meeting specific criteria for filing status, residency, and documentation.
So, losing the CTC can resonate across all financial aspects, from annual tax filings to everyday budgeting. What might initially be a minor tax code modification can have broader consequences.
Additional challenges like custody arrangements and dual taxation can complicate the process. In this situation, contemplating expert assistance might be wise. A tax specialist can offer individualized advice tailored to the individual’s unique situation.