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Family Tax Topics

What is the Child Tax Credit & Additional Child Tax Credit?

As a parent, you might be eligible to claim the Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC).

What is the Child Tax Credit?

The Child Tax Credit is a credit for parents of children ages 16 and under. The Child Tax Credit is $2,000 per child. The amount of credit a taxpayer can claim is based on Modified Adjusted Gross Income (MAGI) and earned income.

How much is the Child Tax Credit?

You may be able to claim a credit of up to $2,000 for each qualifying child. This credit reduces your tax bill dollar for dollar. Once your taxes are reduced to zero, any remaining credit up to $1,400 per eligible child may be claimed as the Additional Child Tax Credit.

How to calculate the Child Tax Credit

The Child Tax Credit is worth up to $2,000 for each qualifying child, but that amount is based on the MAGI of the taxpayer, and phases out when the MAGI exceeds the following thresholds:

  • $400,000 for jointly filed returns
  • $200,000 for all other returns

Use IRS Publication 972 as a worksheet to help you calculate the Child Tax Credit.

Can I claim my child for the child tax credit?

To be eligible, the child must be your qualifying child dependent for federal tax purposes. A child must: 

  1. Be your biological child, stepchild, adopted child, foster child, sibling, or descendent such as a grandchild, niece, or nephew.
  2. Not have provided more than half of their own financial support during the tax year.
  3. Be a US citizen or a US national or resident alien.
  4. Have lived with you for more than half of the year.
  5. Be your dependent for federal tax purposes.

 

For purposes of the credit, the child must be under 17 as of December 31 of the tax year.

Tip/Help

Make sure that your child meets all criteria as a Qualifying Child before claiming the Child Tax Credit.

Is there an income limit? 

You can claim the full Child Tax Credit if your Modified Adjusted Gross Income (MAGI) is under $200,000 – or under $400,000 if you and your spouse file a joint return. If your MAGI is greater than $200,000 ($400,000) the credit is reduced by $50 for each $1,000 over the threshold amount.

Is the credit refundable?

The Child Tax Credit is nonrefundable and reduces the amount of income tax you owe, up to the total amount. It is also refundable up to $1,400 per child on any remaining credit. If you owe $5,000 in taxes and are eligible for a $2,000 Child Tax Credit, your tax bill would be $3,000. If you owe $2,000 and your Child Tax Credit is $3,000, your tax bill would be zero and you may receive a refund of the remaining $1,000 credit by claiming the Additional Child Tax Credit.

How to claim the Child Tax Credit

If you are eligible for the credit, you can do so by claiming it on Form 1040 or Form 1040NR.

If a child’s parents are separated or divorced, who claims the Child Tax Credit?

It’s most common for the custodial parent to claim the Child Tax Credit. However, the parent the child lives with for more than half the year, can allow the other parent to claim the credit by completing Form 8332 for the year and giving it to the other parent for their tax return. 

Tip/Help

Use Schedule 8812 to determine the amount of Additional Child Tax Credit you may claim.

What is the Additional Child Tax Credit (ACTC)?

The Additional Child Tax Credit is a refundable credit that you may receive if your Child Tax Credit is greater than the total amount of income taxes you owe.  For instance, if you’re eligible for a $2,000 Child Tax Credit and your taxes are only $1,000, you may add the remaining $1,000 credit to your refund.

What is the maximum amount of Additional Child Tax Credit?

The maximum Additional Child Tax Credit is $1,400 per child. If you don't need any of your Child Tax Credit, the $600 between the $2,000 Child Tax Credit, and the $1,400 Additional Child Tax Credit per child is lost.

Is there an income requirement?

You must have an earned income of at least $2,500 to qualify. If your income is low, your credit may be limited to 15% of the amount of earned income over $2,500. Unemployment compensation and retirement or IRA distributions are not considered earned income.

 

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