In most cases, the child tax credit is nonrefundable, meaning if your credit is bigger than your tax liability, your tax bill is just reduced to zero. Any remaining unused credit is lost.
However, in certain cases, you can get a child tax credit refund when the credit exceeds your tax liability. This means that you would get a check for the remaining child tax credit after your tax bill has been reduced to zero. This refundable child tax credit is called the Additional Child Tax Credit.
The formula for calculating the refundable Additional Child Tax Credit is fairly complicated and a good reason to use TurboTax. If you have one or more qualifying children and more than $3,000 of earned income (income from wages and other job-related compensation), you may be entitled to a refund of up to 15 percent of your earned income (including tax-free combat pay) in excess of $3,000.
Or, if your earned income is less than $3,000, you may be eligible for a refundable credit if you have three or more qualifying children and you paid Social Security taxes that exceeded your earned income credit.
The 2009 Stimulus Act made it much easier to qualify for the refundable Additional Child Tax Credit by lowering the earned income threshold to $3,000.
As a result, more people with modest incomes should qualify for larger refunds.