Turbo tax does not support using 2019 income to calculate child tax credit

[leonlyyl]

We file jointly and our 2019 income is less than 400000. According to this (https://www.nerdwallet.com/article/taxes/qua[product key removed]-care-tax-credit#:~:text=You%20can%....), we should be able to use 2019 income to compute child tax credit. But no matter what the number I put as 2019 income, I still don't get full child tax credit. I think that's a bug in Turbo tax. Please fix. Thanks!

[DanaB27]

Please be aware, you also may use your 2019 income for the Child Tax Credit if your 2019 earned income was more than your 2020 earned income.

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type "Child tax credit"
3. Click on “Jump to child tax credit”
4. Answer the questions until you reach the screen "Do you want to use last year’s earned income?"
5. Note your current refund amount using your 2020 earned income at the top of the screen.
6. Click "Yes", enter your "2019 Earned Income" if the field is blank and click "continue".
7. Compare the new refund amount using your 2019 earned income with the previously noted refund amount using your 2020 earned income.
8. If your new refund amount is lower click "back" and then select "No" for the "Do you want to use your 2019 income to calculate this credit instead?" question.

Please see What is the Child Tax Credit? for additional information.

[leonlyyl]

Thanks for the reply. If my 2019 earned income was more than your 2020 earned income, I'll need to pay more tax, what's the incentive to switch to use 2019 income?

[DanaB27]

Your 2019 earned income is only used to calculate the Child Tax Credit (or Earned Income Credit if you select it in that section) but it is not used to calculate your 2020 tax. Your 2020 tax is still calculated with your 2020 taxable income.

[leonlyyl]

The bug is that my 2019 income was NOT used to calculate the Child Tax Credit even though I selected to use 2019 income. Turbo tax still used my 2020 income.

[leonlyyl]

In fact no matter what number I put in the '2019 Earned Income' field, my child tax credit didn't change at all because it keeps using my 2020 income to calculate it.

[NCperson]

The credit is calculated by taking 15% of your earned income above $2,500.

so it is possible that your 2019 income and your 2020 income are high enough that it has no impact on the child care credit. 

But let say your 2019 income was $10,000 and your 2020 income was $5000, there would be a benefit to use 2019 - because the credit would be higher 

[leonlyyl]

-- 'But let say your 2019 income was $10,000 and your 2020 income was $5000, there would be a benefit to use 2019 - because the credit would be higher'

Sorry I didn't get this. According to 'the phaseout of the credit begins with $200,000 in income ($400,000 for married filing jointly)', with low income as $10,000 or 5000, they should get full child tax credit ($2000) no matter which year they use, right?

BTW, even if I put $100 as my 2019 income (for test), I still don't get full child tax credit. Is this expected?

[DanaB27]

Please be aware, that only up to $1,400 of the credit is refundable and is phased-in based on your earned income.  In most cases, you must have $2,500 or more of earned income to be eligible for any portion of the refundable Child Tax Credit. You get 15% of the amount earned over $2,500.  

If you have an earned income of $10,000 and no other income, then you won’t have any tax due because the Standard Deduction lowers your taxable income to $0. Therefore, you only qualify for the refundable part calculated like this:

$10,000-$2,500= $7,500

$7,500 x 15% = $1,125 Child Tax Credit.

If you have an earned income of $5,000 and no other income, then you won’t have any tax due because the Standard Deduction lowers your taxable income to $0. Therefore, you only qualify for the refundable part calculated like this:

$5,000-$2,500= $2,500

$2,500 x 15% = $375 Child Tax Credit.

Therefore, it would benefit you to use the 2019 $10,000 earned income.

To get the full refundable part you need an earned income of $11,834

$11,834-$2,500= $9,334

$9,334 x 15% = $1,400 Child Tax Credit.

To get the nonrefundable part you would need to have at least $600 in taxes due and therefore needed a taxable income of $6,000 (line 15 of Form 1040).

With only a $100 earned income you get $0 Child Tax Credit.

"'The phaseout of the credit begins with $200,000 in income ($400,000 for married filing jointly)" means if someone makes too much money (over $200,000/ $400,000 married filing jointly) then their Child Tax Credit is reduced.

[leonlyyl]

Thanks for the detailed explanation. My wife and I file jointly and we have one kid.  We expect to receive full $2000 child tax credit by using 2019 income, but Turbotax keeps using my 2020 income no matter which year I select. 

[DanaB27 · Accepted solution]

You can only use your 2019 income for the Child Tax Credit if your 2019 earned income was more than your 2020 earned income. You stated that your 2020 income was more than your 2019 income, therefore this option does not apply to you. 

And since your income was over $400,000 your Child Tax Credit is phased out. Therefore, you will not get the full amount.

[leonlyyl]

Now I get it. Thanks for the patient replies.