Our program automatically calculates the Child Tax Credit and the Additional Child Tax Credit based on the dependents and income entered into your account.
With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $2,000 for each qualifying child under age 17. A qualifying child for this credit is someone who:
- Is claimed as your dependent,
- Child must have a SSN (ITIN not allowed for Child Tax Credit or Additional Child Tax Credit)
- Was under age 17 at the end of the tax year,
- Child did not provide more than half of his or her own support for the year
- Child lived with you for more than half of the year
- Child did not file a joint tax return for the year (or files only to claim a refund of taxes withheld or estimated tax paid)
- Is your son, daughter, adopted child, grandchild, stepchild or eligible foster child, your sibling, step-sibling or their descendant, and
- Is a U.S. citizen or resident alien.
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
- Married Filing Jointly $400,000
- Married Filing Separately $200,000
- All others $200,000
You must have at least $2,500 in earned income on your return to claim the credit. In addition, the Child Tax Credit is limited by the amount of the income tax you owe as well as any alternative minimum tax you owe. For example, if the amount of the credit you can claim is $2,000, but the amount of your income tax liability is $400, the credit ordinarily will be limited to $1,600. If the amount of credit you can claim is $2,000, but the amount of your tax liability is $0, or you are expecting a refund, you cannot claim the Child Tax Credit. See below to see if you can claim the Additional Child Tax Credit through one of the "Exceptions".
Exceptions: There are two exceptions to this general rule. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as Additional Child Tax Credit. Any Additional Child Tax Credit is also automatically calculated by the program.
First, you may claim up to 15 percent of the amount by which your earned income exceeds $2,500 (15% of the result of: Your Earned Income - $2,500). For members of the Armed Forces who served in a combat zone, nontaxable combat pay counts as earned income when figuring this credit limit.
Second, if you have three or more qualifying children, you may claim up to the amount of Social Security taxes you paid during the year, minus any Earned Income Tax Credit you receive. If you qualify under both these exceptions, you receive the greater of the two amounts, up to the difference between your tax liability and your regular Child Tax Credit.
For more information covered in IRS Publication 972, click here.