1. Child tax credit
Spring 2018, lamc

2. Introduction
Child Tax Credit is a nonrefundable credit that allows taxpayers to claim a tax credit up to $1,000 per qualifying child.
Taxpayer who are not able to claim the full amount of the nonrefundable credit may be able to take the refundable portion of the additional child tax credit.
Form used: Form 8812, Child Tax Credit
Taxpayers who improperly claim the child tax credit or the additional child tax credit they can be banned from claiming the credit for either two or ten years.

3. Eligibility
Must have a qualifying child that is claimed as the taxpayer’s dependent.
Is under 17 on December 31 of the tax year
Lived with the taxpayer for more than 6 months of the year (special rules for divorced/separated parents)
Did not provide over half of his or her own support
Meets the relationship test
Is a U.S. citizen, U.S. national or resident of the U.S.

4. Child tax credit Amount of credit
Up to $1,000 for each qualifying child.
Credit may be reduced or phased out depending on taxpayer’s modified adjusted gross income. (typically the MAGI is the same as the AGI).
Tax software will automatically calculate the Child Tax Credit
Refer to Publication 4012, Tab G, Nonrefundable credits; G-12 to G-13

5. Additional child tax credit
Available if taxpayers do not receive the full child tax credit.
Refundable credit.
Allows eligible taxpayers to claim up to $1,000 for each qualifying child after subtracting the allowable amount of the child tax credit.
Taxpayer must have over $3,000 of earned income.
Credit is based on lesser of:
15% of taxpayer’s earned income that is over $3,000, or
The amount of unused child tax credit (caused when tax liability is less than the allowed credit)
Credit may be reduced or phased out depending on taxpayer’s modified adjusted gross income. (typically the MAGI is the same as the AGI).

6. Examples
Gary and Rachel are married with two dependent children. They will file a joint return for the year. The children are qualifying children for purposes of the child tax credit. Gary and Rachel’s MAGI is above the threshold limit, and their tax liability is $6,200. Based on this information, Gary and Rachel:
Are not eligible for the maximum credit and can use the Child Tax Credit Worksheet in the Form Instructions to figure their child tax credit.
Will have to use Publication 972 to figure their child tax credit.
Are eligible to claim the full child tax credit.
Are not eligible to claim any amount for the child tax credit.
Answer: A.

7. Exercises
Ricardo and Feliciana are married filing jointly and have five dependent children under the age of 17. Ricardo and Feliciana have a SSN, but their children have ITINs. The children are qualifying children. Ricardo and Feliciana have earned income of $9,000 and their tax liability is $0.
Are they eligible for the child tax credit?
Will they benefit from the child tax credit?
Are they eligible for the additional child tax credit?
Will they benefit from the additional child tax credit?
Yes
No b/c their tax liability is zero.
Yes eligible for additional child tax credit.
Yes will benefit from additional child tax credit.

8. Exercises
Everett and Catherine lived in the U.S. all year and have Individual Taxpayer Identification Numbers (ITINs). They are not U.S. citizens and are not lawfully present in the U.S. Everett, age 24, and Catherine, age 22, are married and want to file a joint return.
They have one child, Emory, who is 3 years old and lived with them all year.
Everett earned $32,000 in wages. They had no other income.
Everett and Catherine provided all the support for Emory.
Emory has a Social Security number and is a U.S. citizen.
Which of the following benefits can Everett and Catherine claim on their tax return?
They can claim Emory as a dependent.
They can claim the child tax credit.
They can claim Emory as a dependent and take the child tax credit.
They cannot claim the dependency exemption or the child tax credit.
Answer: c.