CHILD TAX CREDIT

There was lots of hype in the news about the new $2000 Child Tax Credit when the tax law changed for 2018 and beyond.    Unfortunately, some people do not yet understand that it does not mean they will automatically receive $2000 per child just for filing a tax return.

Do not assume your refund will include $2000 per child for child tax credits.  It does not work that way.  The CTC is used first to reduce your tax liability to zero. After that, there is a refundable portion —up to $1400 — called the Additional Child Tax Credit that is calculated based on the amount of income you earned.  You do not necessarily get the maximum amount.  You get 15% of the amount of income earned above $2500--UP to the maximum amount possible.

If your child turned 17 in 2019, even on the last day of 2019, you do not get the child tax credit.  There are no exceptions to the rule.  You can still claim your child as a dependent.

Your child must have a Social Security number to get the CTC. 

If your child was born in 2019 you need to say the child lived with you for the WHOLE year.

If your child lived with you for less than half the year you cannot get CTC.

If you did not earn at least $2500 you cannot receive the child tax credit.  Beyond that amount the CTC you receive is affected by your tax liability and the amount you earned.  You might not get the full $2000 of CTC.

The child tax credit is reduced by $50 for every $1000 of AGI over these limits:

Married filing jointly                $400,000    (CTC disappears at $440,000)

Single, Head of Household, Married Filing Separately or qualifying widower               $200,000  (CTC disappears at $240,000)

Look at your 2019 tax return to see the credits you received:

Child tax credit line 12a

Additional Child Tax Credit line 17b   (schedule 8812)

Credit for Other Dependents line 12a

PREVIEW 1040

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As stated, the Child Tax Credit is available for each qualifying child under the age of 17. The Child Tax Credit is valued at $2,000 per qualifying child. However, in the tax year that a child turns 17, they no longer qualify for this credit and may, instead, qualify for the Credit for Other Dependents, which is valued at $500 per qualifying dependent. The Child Tax Credit itself may be nonrefundable first (reducing your tax liability dollar-for-dollar to the full amount of the credit or $0), with up to $1,400 refundable, which could increase the amount of your refund. The Credit for Other Dependents is nonrefundable only. Keep in mind, there are income phaseouts of the credit as described previously.

Child Tax Credit