If you can't claim the full Child Tax Credit because you owe less tax than the available credit, you may be able to claim up to $1,400 as the refundable Additional Child Tax Credit.
For information on the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, the second coronavirus relief package signed into law on December 27, 2020, please visit the “New Coronavirus Relief Package: What Does it Mean for You and a Second Stimulus Check” blog post.
Raising a child is expensive. According to a 2015 report by the U.S. Department of Agriculture, it costs roughly $233,000 to cover food, housing, transportation, health care, clothing, child care, education, and everything else a child needs to thrive from birth through age 17. Fortunately, the Additional Child Tax Credit (ACTC) gives parents a chance not only to lower their tax bill to help offset these costs, but also to potentially put more money back in their pockets.
What is the Additional Child Tax Credit?
Understanding the Additional Child Tax Credit begins with the standard Child Tax Credit (CTC).
The Child Tax Credit is worth up to $2,000 for each child who meets the following requirements:
- The child is younger than age 17 at the end of the tax year.
- The child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece, or nephew.
- You claim the child as a dependent.
- The child doesn’t provide more than half of their own support.
- The child lived with you for more than half of the year.
- The child is a U.S. citizen, U.S. national, or U.S. resident alien.
- The child doesn’t file a joint return with anyone else, unless the only reason they file a return is to claim a refund of taxes withheld or estimated taxes paid.
Like other tax credits, the Child Tax Credit is a dollar-for-dollar reduction in your tax.
If your available Child Tax Credit is greater than your tax liability, the Child Tax Credit can only reduce your tax bill to zero — you don’t get any unused portion of the credit back as a refund.
However, you may be able to claim the Additional Child Tax Credit, which allows you to receive up to $1,400 of the $2,000 Child Tax Credit per child as a refund. This means you get a check for the remaining Child Tax Credit (up to $1,400 per child) after your tax bill is reduced to zero.
To determine whether you’re eligible to claim the Additional Child Tax Credit, you can fill out the Child Tax Credit Worksheet included in the Form 1040 instructions. If you qualify, the worksheet will direct you to fill out Schedule 8812 to claim the Additional Child Tax Credit.
If you use TurboTax to prepare your tax return, you don’t need to fill out any worksheets or worry about which forms to use. TurboTax will ask you a few simple questions about your dependents and income, calculate your credit, and fill in all of the right forms for you.
Who can claim the Additional Child Tax Credit?
The Child Tax Credit and the Additional Child Tax Credit are meant to help working parents with low to moderate incomes. For that reason, families must have a minimum of $2,500 of earned income to claim the ACTC. Earned income can come from salaries and wages, self-employment, and some disability payments. Parents whose income comes solely from "unearned" income — such as interest and dividends, pensions and annuities, social security, unemployment, alimony or child support — do not qualify.
The Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020 as a stimulus measure to provide relief to those affected by the pandemic. For tax year 2020, The CAA allows taxpayers to use either their 2020 or 2019 earned income in calculating the Additional Child Tax Credit (ACTC) as well as the Earned Income Tax Credit (EITC).
Both the Child Tax Credit and the Additional Child Tax Credit phase out for high-income taxpayers. Married couples with modified adjusted gross income (MAGI) greater than $400,000 and other filing statuses with modified adjusted gross income greater than $200,000 will have their credit reduced by $50 for each $1,000 or part of $1,000 that their modified adjusted gross income exceeds those amounts.
To claim the Additional Child Tax Credit, your child must have a Social Security number. If they don’t have a Social Security number, you can’t use the child to claim the Additional Child Tax Credit.
Receiving your Additional Child Tax Credit refund
Refundable tax credits such as the Additional Child Tax Credit are particularly attractive to fraudsters who file doctored tax returns to claim bigger refunds. The Protecting Americans from Tax Hikes (PATH) Act of 2015 gave the IRS more time to review tax returns and prevent fraudulent returns from being processed.
According to the PATH Act, the IRS cannot issue refunds before February 15 for any filer claiming the Earned Income Tax Credit or the Additional Child Tax Credit. The rule applies to your entire refund, so you won't get separate checks for the portions of your refund that are or aren't associated with the Additional Child Tax Credit. In other words, your total refund will be delayed.
This means that even if you file your tax return in early January, the IRS will hold your refund until at least February 15.
Credit for tax years prior to 2018
Prior to the Tax Cuts and Jobs Act of 2017, the Child Tax Credit and the Additional Child Tax Credit looked a bit different. The Child Tax Credit provided a credit worth up to $1,000 per child. No portion of the credit was refundable, so if it reduced your tax liability to zero, the excess credit had no effect on your refund.
The Additional Child Tax Credit was an entirely separate tax credit, but it applied only to families with earned income above $3,000. Families received a refundable credit equal to 15% of their earned income over that threshold, up to $1,000 per child.
Tax reform simplified these credits a bit by combining them into one $2,000 credit. It also allowed more taxpayers to take advantage of them by lowering the earned income threshold and raising the phase-out levels.
TurboTax has you covered
To claim the Additional Child Tax Credit, you need to complete Schedule 8812 and attach it to your Form 1040 or Form 1040-SR. But don't worry about memorizing all of the rules and limitations for claiming this credit.
TurboTax will ask you simple questions about you and your life and help you fill out the right forms. TurboTax has you covered from simple to complex tax returns to help you get every dollar you deserve.