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
There are several requirements to get the full child tax credit, but often it is limited because your income is too low. When this happens, your income tax may be less than the $2,000 maximum child tax credit amount allowed per child. In this circumstance, the credit cannot be more than your income tax.
You can view your income tax amount by clicking on the "Tax Tools" option on your left menu bar while working on your tax return. Then choose "Tools" and "View Tax Summary." Look for "Tentative Tax" and see if that amount is less than your anticipated child tax credit, in which case your child tax credit will be limited to your tentative tax amount.
Also, please keep in mind that you are not entitled to the full $2,000 credit if your child is over the age of 16. In this case, you are only entitled to a credit of up to $500 per child. The child tax credit will also be reduced if your income is over $200,000 ($400,000 if you are filing a joint tax return) for tax returns filed in 2019.
Although you may not be entitled to the full child tax credit amount, you may be eligible for an "additional child tax credit" of up to $1,400. If this applies to you, you would see it on the tax summary screen in TurboTax as part of the "Total Credits" entry. Also, it would be listed on your tax return on line 18(b). You can learn more about the child credit from this IRS article: https://turbotax.intuit.com/tax-tips/family/7-requirements-for-the-child-tax-credit/L3wpfbpwQ
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