Losing the Child Tax Credit in 2024? Here's How Big of a Tax Hit You'll Take

The Child Tax Credit is one of America's best-known tax breaks, because it gives an extra $2,000 per child back to parents at tax time. Thanks to the Child Tax Credit, if your family has two children under the age of 17, you get $4,000 discounted from your federal income tax bill.

But the Child Tax Credit doesn't last forever. You can only claim the credit for children who are under the age of 17. That means that if your child is turning 17 in 2024, you won't get to claim the Child Tax Credit on your 2024 tax return (due in April 2025).

If you're about to lose the Child Tax Credit from your child aging out of it, here's how you can plan ahead to reduce the tax hit.

How the Child Tax Credit works

If you have a child with a Social Security number, and your income is $200,000 or less for singles, $400,000 or less for married couples filing jointly, you can get the Child Tax Credit. The Child Tax Credit is $2,000 per child under the age of 17. To qualify for the tax credit, your child can be your son, daughter, stepchild, eligible foster child, or other dependents that live with you for more than half the year (like a step-sibling, half-sibling, grandchild, niece, or nephew).

This means:

• If you have one child, age 15: you get $2,000 for the Child Tax Credit.
• If you have two children, ages 12 and 14: you get $4,000 of Child Tax Credits.
• If you have three children, ages 18, 15, and 13: you get $4,000 of Child Tax Credits.

If you're a married couple filing jointly with two children, ages 10 and 12, and your household income is $80,000, here is how the Child Tax Credit reduces your tax bill:

For this family of four, the Child Tax Credit reduced their federal income tax bill substantially. They only ended up owing $1,839 of tax. Depending on your W-4 tax withholdings from your paycheck, the Child Tax Credit can help you get a bigger tax refund.

Keep in mind that the Child Tax Credit is only valid for children under the age of 17. If your child is turning 16 in 2024, you're fine: you still get that $2,000 tax credit on your 2024 tax return. But if your child is turning 17 in 2024 -- get ready for a $2,000 tax hike.

How to prepare for losing the Child Tax Credit

If your child is turning 17 in 2024, you should start now to prepare for the loss of that Child Tax Credit money. Having to pay an extra $2,000 at tax time is not fun, and it might leave you owing IRS penalties for underpayment of tax.

Here are a few ways that you can plan ahead to take the sting out of losing the Child Tax Credit.

Update your W-4 at work

Change your W-4 tax withholdings to have more money withheld from your paycheck. Many employers have an automated W-4 system or questionnaire that will ask you for the ages of your children.

The downside of this plan is that it will make your take-home pay a little lower. For example, if you get paid twice a month (24 paychecks per year), that means you should try to withhold an extra $83.33 out of each paycheck to make up for that $2,000 of lost tax credit.

Reduce your taxable income with tax deductions

If possible, put extra cash into your tax-deductible retirement accounts like a 401(k) or traditional IRA. If you have a health savings account (HSA), try to make the maximum contribution for 2024.

Not everyone has enough income to make these strategic tax planning moves, but if you're about to lose the Child Tax Credit, it helps to think ahead. If your tax bill is going to be $2,000 more when you file your taxes, try to reduce your taxable income now.

For example, here are two hypothetical tax returns for two married couples filing jointly with one child who just turned 17. Couple A puts $5,000 into a 401(k), but makes no other contributions to tax-deductible accounts. Couple B puts $5,000 into a 401(k) and makes additional contributions to accounts that increase their tax deductions.

Making these extra contributions to tax-advantaged accounts can reduce Couple B's tax bill by $1,710 -- almost enough to make up for the loss of the $2,000 Child Tax Credit.

Bottom line

Losing the Child Tax Credit when your child turns 17 can lead to an extra tax bill. Plan ahead for how to make up for that $2,000 on your tax return, and use tax software to make sure you're paying the right amount. Change your W-4 at work, or make strategic tax moves to increase your tax deductions.