Child Tax Credit

1. Child Tax Credit • Child Tax Credit is one of the major refundable tax credit • The maximum amount taxpayers may claim for the nonrefundable child tax credit is $1,000 for each qualifying child

2. If you have $1000 refundable credit but your tax liability is $750 then what happens? • You get only $750 • You get $1000

3. Answer is B • In our case the item is refundable credit so the remaining portion given from government funds. • If it is a non refundable credit the remaining portion rounded to zero.

4. Eligibility to claim the child tax credit • The taxpayer must have at least one qualifying child • Meet the relationship criteria • Meet the age criteria • Not have provided over half of his or her own support • Have lived with the taxpayer for more than 6 months of the tax year (remember the special rules for divorced or separated parents or parents who live apart) • Be a U.S. citizen, U.S. national, or resident of the U.S

5. Which of the following Daisy’s kid is not meet the age criteria? • John age 21 full time student • Emily age 23 part time student • David age 16 high school dropout • All of the Daisy’s kid meet the age criteria

6. Answer is B • Child tax credit age limit is 17 in nominal case • Child tax credit age limit is 24 if child is a full time student.

7. John's adopted son, William, is 10. He is a citizen of the United States and lived with John for the entire tax year. John provided all of his son's support. Based on the Child Tax Credit Interview Tips, is William a qualifying child for the child tax credit? • Yes William is a qualifying child • No, adopted kid’s not qualified for the child tax credit.

8. Answer is A • William is a qualifying child for the child tax credit because he was under the age of 17 at the end of the tax year; he meets the relationship requirement, lived with John for at least 6 months of the year; and John provided his complete support.

9. Income Restrictions • Married Filing Jointly - $110,000 • Single, Head of Household, or Qualifying Widow(er) - $75,000 • Married Filing Separately - $55,000

10. Children of Divorced or Separated Parents or Parents Who Live Apart • The custodial parent is the parent with whom the child lived for the greater number of nights during the year. • The other parent is the noncustodial parent. • In most cases the custodial parent may claim the dependency exemption for the qualifying child. • The noncustodial parent, however, may be entitled to claim the dependency exemption for a child and thus the child tax credit and additional child tax credit.

11. Additional Child Tax Credit • The additional child tax credit is for certain individuals who do not qualify for the full amount of the (nonrefundable) child tax credit. • 15% of the taxpayer's taxable earned income that is more than $3,000

12. Additional child tax credit for taxpayers with three or more qualifying children • Had social security or Medicare taxes withheld from their pay • Were self-employed and paid self-employment tax • Paid tax on tips not reported to their employer • Did not receive the maximum available child tax credit

13. Calculating the Credit • Use Form 8812 to calculate the additional child tax credit • The credit will appear on the additional child tax credit line of the Payment section of the electronic Form 1040

14. Summary • The child tax credit is a nonrefundable credit that allows qualifying taxpayers to reduce their tax liability to the lesser of the amount of the credit or their adjusted tax liability. • Taxpayers who are not able to benefit from the maximum $1,000 per qualifying child may be eligible to take the additional child tax credit, which is a refundable credit. The amount of the credit is reduced if the taxpayers MAGI is above the limit for their filing status.