Raising a child these days often requires a big cash outlay. You might, however, be able to get some of that money back when it comes time to file your tax return. The child tax credit is nonrefundable, meaning if your credit is bigger than your tax liability, your tax bill is reduced to zero.
Learn who’s eligible for the child tax credit, how much it is and how to claim it. Review these six things you need to know about the child tax credit so that you don’t miss out on a deduction you’re entitled to take.
1. Qualifying Child Requirements
To qualify for the child tax credit, a child must meet several requirements. See if your child meets these conditions:
- Your child must be 16 or younger at the end of the year.
- A qualifying child can be your child, stepchild, adopted child, foster child, sibling, stepsibling, half sibling, or a descendant of one of them, such as your grandchild, niece or nephew.
- The child must live with you for more than half the tax year. Exceptions apply, however, if he lives at boarding school or somewhere else for medical care.
- The child cannot pay for more than half of his own expenses.
- You must claim the child as your dependent on your tax return, and he can’t file a joint return except to claim a tax refund.
- The child must be a U.S. citizen, U.S. national or U.S. resident alien and have a Social Security or individual taxpayer ID number.
Know Before You File: 10 Commonly Missed Tax Deductions
2. Tiebreakers If Multiple People Can Claim a Child
Only one person can claim a child on their taxes. If more than one person is eligible to claim him, the IRS uses these tiebreaker rules to determine who can claim the credit:
- The child’s parent or both parents if they file jointly.
- The parent with whom the child lived most during the year.
- The parent with the highest adjusted gross income.
- If no parents can claim the child, the person with the highest adjusted gross income.
3. How to Claim the Child Tax Credit
First, make sure your child is eligible. When you file your income taxes, use Form 1040 or Form 1040A to claim the credit. If your qualifying child has an ITIN instead of a Social Security number, you will also need to file Form 8812.
4. Additional Child Tax Credit
The child tax credit isn’t refundable, which means if you have a lower tax liability than the amount of the credit you won’t receive the credit for a refund. You might qualify for the additional child tax credit, however, which is refundable as long as you don’t have any foreign earned income and you file Form 8812.
For instance, if you have two qualifying children and your income doesn’t limit your child tax credit, you would be eligible for a credit of $2,000. For a tax liability of only $1,500, though, you could claim a $1,500 child tax credit and claim the additional child tax credit in the amount of $500.
5. Don’t Include Child Care Expenses
Unlike the child and dependent care credit, you don’t have to show you had any child care expenses — like after-school care — to claim the child tax credit. The amount is fixed regardless of your expenses.
6. Be Aware of the Income Limit and How It Works
The higher your income level is, the less chance you have of claiming the full child tax credit. The credit is reduced $50 for each $1,000 of income that exceeds the phase-out levels.
For example, if you’re married filing jointly, the credit phases out starting at $110,000; and if you file as single or head of household, it starts phasing out at $75,000. So if you file as head of household, and your income is $77,000, your child tax credit will be reduced by $100 — or $50 for each $1,000 over the income limit of $75,000.
Keep Reading: Tax Breaks for Single Parents
Get the Most Out of Your Child Tax Credit
The child tax credit could save you up to $1,000 — for each qualifying child — each tax year. Here are a few questions and answers that will help you get the most out of your child tax credit.
What Is the Child Tax Credit on a W-4?
A W-4 helps your employer determine how much federal income tax to withhold from your paycheck, and Line G on a W-4 is where parents or guardians indicate whether or not they have children that qualify for the child tax credit. Depending on the amount of the child tax credit you receive, you might need to increase the number of allowances you claim to avoid having too much withheld from your paycheck.
For total income of less than $70,000 if single and $100,000, if married, you enter the numeral two for each eligible child, minus one if you have two to four children or minus two if you have five or more children. For total income between $70,000 and $84,000 if single or $100,000 and $119,000, if married, you enter the numeral one for each eligible child.
How Much Is the Child Tax Credit for 2017?
The maximum child tax credit for the tax year 2017 is $1,000 per qualifying child. The credit phases out, however, if your modified adjusted gross income is too high, depending on your filing status. You calculate your modified adjusted gross income by adding certain types of earned income exclusions to your adjusted gross income.
How Much Will I Get for the Child Tax Credit?
The child tax credit reduces your tax liability dollar-for-dollar and you can get up to $1,000 per qualifying child, depending on your income level. For example, two qualifying children could net you a $2,000 credit if you’re married filing jointly and collectively earn less than $110,000.
Jamie Young contributed to the reporting for this article.