The credits that a taxpayer may qualify for with dependent children.
- Earned Income Tax Credit
- Child Tax Credit (has two parts)
Earned Income Tax Credit will be based on filing status (ex. single, married filing jointly, head of household), income earned for the year, and number of qualifying children claimed on your tax return.
You may be able to figure how much your earned income credit would be by using the yearly publication from the IRS.
Here is a link to the 2023 Earned Income Credit Publication. EITC Chart starts on page 27 of the publication.
First find the amount of your earned income in the left column, then move to the right to find your filing status and the number of qualifying children.
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Example: A married couple with 2 qualifying child dependents with earned income of $35000 would receive Earned Income credit of $3768.
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Child Tax Credit is up to $2000 per child under 17 years old at the end of the tax year.
The child tax credit is based on earned income over $2500.
For example, if your earned income is $20,000 total, the child tax credit will be calculated on $17,500. The amount of your child tax credit will be 15% of the income used to calculate the credit. In this example, $17,500 x .15 is $2625.
Therefore, the max credit for taxpayers with income of $20000 is $2625, regardless of how many qualifying children are on the tax return.
A taxpayer with one qualifying child could receive the entire $2000 child tax credit. A taxpayer with 2 qualifying children would receive $2625 maximum because they are limited to this amount based on income for the year.
More income will receive more of the credit up to the $2000 per child.
The Child Tax Credit has 2 sections to consider.
*Refundable referred to as the "child tax credit"
*Nonrefundable referred to as the "additional child tax credit"
If you do not have any tax liability on your tax return, the child tax credit will not calculate. The additional child tax credit will calculate instead. The highest your additional child tax credit can be is $1600 per child.
If you do have tax liability, the tax you owe for the year is subtracted first. Any portion of the child tax credit not used will be transferred to your refundable additional child tax credit up to $1600 per child.
*Dependents over 17 may qualify for the $500 other dependents credit.
*Education credit exists for dependents that you pay qualifying post secondary education expenses for
https://www.irs.gov/credits-deductions/individuals/education-credits-aotc-llc
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