There is no reason to wait to file your taxes, especially if you are expecting a refund from the IRS. But if you are a parent planning to claim the child tax credit this year, you may wonder whether your refund could be delayed. With Tax Day quickly approaching, understanding the rules around the child tax credit and the additional child tax credit can help you manage your expectations and plan your finances accordingly.

The child tax credit is a federal tax benefit designed to help families offset the cost of raising children. It allows eligible parents to reduce their tax liability dollar-for-dollar, depending on how many dependent children they can claim. Under the current rules, the credit can both lower the amount you owe in taxes down to $0 and, in some cases, increase the size of your refund through a related provision known as the additional child tax credit.

However, that refundable portion is exactly what can cause a delay. The IRS is required by law to hold refunds that include the additional child tax credit or the earned income tax credit until mid-February as a anti-fraud measure. This year, the IRS has indicated that taxpayers who file electronically and choose direct deposit should receive such refunds by March 3, 2025. So if you are only now getting ready to file, you are unlikely to face any additional delay beyond the normal processing time.

How much can you receive from the child tax credit?

Under the federal rules in effect for the 2024 tax year, you can claim up to $2,000 per dependent child who is under the age of 17 at the end of the tax year. This credit is nonrefundable, meaning it can reduce your tax liability but cannot generate a refund if the credit exceeds the amount of tax you owe. For example, if you owe $1,500 in federal income tax and claim a $2,000 credit, the credit will eliminate your entire tax bill, but you will not receive the remaining $500 as a refund.

However, there is an exception. If you have no tax liability or if the nonrefundable portion of the credit does not cover the full amount, you may be eligible for the additional child tax credit. This refundable credit allows you to receive up to $1,700 per child as a refund, even if you owe no taxes at all. For many low- and middle-income families, this refundable portion is the key to receiving a meaningful tax refund.

It is important to note that the $2,000 credit and the $1,700 refundable threshold are temporary values established by the Tax Cuts and Jobs Act of 2017. That law is set to expire at the end of 2025, meaning these amounts will not apply to the 2025 tax year unless Congress acts to extend them. If the current law expires, the child tax credit would revert to its permanent pre-2018 value of $1,000 per dependent child, and the additional child tax credit rules would change accordingly.

When will your refund arrive if you claim the additional child tax credit?

If you claim the additional child tax credit, the IRS is legally required to hold the refundable portion of your refund until at least February 15. This requirement is part of a broader effort to prevent fraud and verify that the claims are legitimate. The IRS often uses this time to cross-check income records and other data to ensure the credit is not being improperly claimed.

According to the IRS, if you file your tax return electronically and elect to receive your refund via direct deposit, and you claim either the earned income tax credit or the additional child tax credit, you should expect to see your refund by March 3, 2025. This date assumes there are no errors in your return and that the IRS does not need additional information from you. If you choose to receive a paper check, the wait will be longer, as mail delivery can add several days or even weeks.

At this point in the tax season, if you have not yet filed, you should not worry about the mid-February hold. The delay is already baked into the IRS processing calendar, and your refund will be issued after the required waiting period. What matters most is that you file accurately and include all necessary forms, such as Schedule 8812, to claim the child tax credit correctly.

Who is subject to the refund delay?

The delay applies specifically to taxpayers who claim the refundable additional child tax credit. It also applies to those who claim the earned income tax credit, another refundable credit designed to help low- and moderate-income workers. If you only claim the nonrefundable child tax credit, meaning you use it solely to reduce your tax bill down to $0 and you do not receive any money back from that credit, then the delay rules do not apply to you.

The distinction between a nonrefundable and a refundable credit is a common source of confusion. A nonrefundable credit can lower your tax bill to zero, but any leftover amount is forfeited. A refundable credit, on the other hand, can trigger a refund even if you had no tax liability from the start. The child tax credit is primarily nonrefundable, but the additional child tax credit is the refundable component that can put cash in your pocket.

To determine whether you are eligible for the additional child tax credit, you need to calculate your tax liability and your earned income. The IRS provides a worksheet and Form 8812 to help you figure out the exact amount. Generally, the additional child tax credit is most valuable to families with lower incomes, because they are more likely to have little or no federal income tax liability.

Why does the IRS delay such refunds?

The delay is not intended to inconvenience taxpayers. It is a fraud prevention measure that stems from past incidents where criminals filed fraudulent returns claiming these credits. By holding refunds until mid-February, the IRS gains additional time to verify income information reported by employers and other payers through Forms W-2 and 1099. This process helps ensure that the money goes to the rightful claimants.

For most honest filers, the delay is a minor inconvenience, especially if they file early and choose direct deposit. The IRS typically processes most refunds within 21 days for electronically filed returns. Adding the extra waiting period for refundable credits means you might see your refund by early March, rather than late February. While this can feel like a long time, it is still faster than receiving a paper check through the mail.

What should you do if you are still waiting for your refund?

If you have already filed your federal tax return and claimed the additional child tax credit, you can use the IRS "Where's My Refund?" tool to track your refund status. This online tool is updated once every 24 hours and requires you to enter your Social Security number, filing status, and the exact refund amount. You can also use the IRS2Go mobile app to check the status on your phone.

In most cases, the tool will show a status of "Received," "Approved," or "Sent." Once your refund has been approved, the IRS assigns a direct deposit date. If your refund has not arrived by that date, it is worth checking with your bank to ensure there are no holds or errors. If you are expecting a paper check, allow additional time for postal delivery, especially if you live in a remote area.

The future of the child tax credit

As noted, the current $2,000 credit limit and the $1,700 refundable threshold are scheduled to expire after the 2025 tax year. This means the 2025 tax season, which begins in early 2026, will be the last one where these amounts are guaranteed under existing law. Lawmakers have debated whether to make the expansion permanent, but no such legislation has been passed.

If the credit reverts to $1,000 per child, many families will see a significant reduction in their tax savings. For low-income families, the refundable portion could shrink substantially, affecting the size of their annual refunds. This potential change is closely watched by tax professionals and family advocacy groups, who argue that the higher credit is vital for helping families cope with the cost of child care, education, and other necessities.

For now, if you have dependents under age 17 and you have not yet filed your 2024 taxes, you should take full advantage of the current credit. Consult a tax professional or use reputable tax software to ensure you claim the correct amount. The child tax credit is one of the most valuable benefits available to families, and understanding its rules can help you avoid surprises when your refund arrives.

In addition to the federal credit, many states offer their own child tax credits or similar provisions. Some states have started to implement their own refundable credits in recent years, which can provide even more relief. If you live in a state with a state income tax, be sure to research state-specific tax benefits that you may be eligible for, as these often have different rules and deadlines than the federal credit.

Finally, while the child tax credit is a major topic for parents, it is not the only credit that can affect your refund. Home energy tax credits, education credits, and retirement savings contributions are other examples. Being aware of all available deductions and credits can help you maximize your refund and keep more of your hard-earned money.

As the tax season progresses, focus on filing accurately and on time. If you are claiming the additional child tax credit, remember that a short delay is normal and expected. The IRS has already scheduled its processing to accommodate the required February hold. Once your return is accepted, you can track its progress and look forward to receiving your refund in March or shortly thereafter.

Source:CNET News