How to qualify for child tax credit and additional child tax credit
Many families rely on tax credits to ease the financial burden of raising children. The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) are two important benefits that can provide significant tax relief. Understanding how to qualify for these credits can help families maximize their tax savings and improve their financial well-being.
What is the Child Tax Credit?
The Child Tax Credit is a federal tax benefit designed to help families with dependent children. It reduces the amount of tax owed dollar-for-dollar, which can lead to a lower tax bill or a larger refund. The credit amount can vary depending on income, filing status, and the number of qualifying children.
Key Features of the Child Tax Credit
Credit amount: Up to $2,000 per qualifying child under age 17.
Refundable portion: Up to $1,400 of the credit can be refundable, meaning you can receive it even if you owe no taxes.
Income limits: The credit begins to phase out at $200,000 of modified adjusted gross income (MAGI) for single filers and $400,000 for married couples filing jointly.
Who Qualifies for the Child Tax Credit?
To qualify for the Child Tax Credit, the child and taxpayer must meet specific criteria:
Age: The child must be under 17 at the end of the tax year.
Relationship: The child must be your son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of these.
Support: The child must not provide more than half of their own support.
Residency: The child must have lived with you for more than half the year.
Dependent status: The child must be claimed as a dependent on your tax return.
Citizenship: The child must be a U.S. citizen, U.S. national, or U.S. resident alien.
Taxpayer identification number: The child must have a valid Social Security number by the due date of your tax return.
Example
If you have two children under 17 who meet all the criteria, you could qualify for up to $4,000 in Child Tax Credit, assuming your income is below the phase-out threshold.
What is the Additional Child Tax Credit?
The Additional Child Tax Credit is a refundable credit available to taxpayers who qualify for the Child Tax Credit but cannot claim the full amount because their tax liability is too low. It allows eligible taxpayers to receive a refund even if they owe no taxes.
How the Additional Child Tax Credit Works
If your Child Tax Credit exceeds your tax liability, you may be able to claim the ACTC for the unused portion.
The refundable amount is limited to 15% of your earned income above $2,500.
The maximum refundable amount is $1,400 per qualifying child.
How to Qualify for the Additional Child Tax Credit
To qualify for the ACTC, you must:
Have earned income above $2,500.
Have at least one qualifying child who meets the Child Tax Credit requirements.
Have a Child Tax Credit amount that is more than your tax liability.
Example
Suppose your total Child Tax Credit is $3,000, but your tax liability is only $1,000. You can claim the $1,000 to reduce your tax bill to zero, and then claim the ACTC for the remaining $2,000, subject to the earned income limit.
Steps to Claim the Child Tax Credit and Additional Child Tax Credit
Gather documentation: Collect Social Security numbers for all qualifying children and proof of income.
Complete your tax return: Use IRS Form 1040 or 1040-SR and attach Schedule 8812 to claim the credits.
Calculate your credit: Follow IRS instructions to determine the amount of Child Tax Credit and Additional Child Tax Credit you qualify for.
File your return: Submit your tax return electronically or by mail by the deadline.
Keep records: Save copies of your tax return and supporting documents for at least three years.
Common Questions About the Credits
Can foster children qualify? Yes, foster children who meet the residency and relationship tests qualify.
What if my income is too high? The credit phases out at higher income levels, so you may receive a reduced amount or none at all.
Can I claim the credit for children over 17? No, the Child Tax Credit only applies to children under 17.
What if I share custody? Only one parent can claim the credit for a child in a given tax year.
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