The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC) are tax benefits available to individuals who claim a child as a dependent. These credits help reduce the amount of tax owed and, in some cases, provide a refund. The key difference between the two is that the CTC is non-refundable, while the ACTC is refundable, meaning you could receive money back even if you owe little to no taxes.
Eligibility
To qualify for the CTC or ACTC, a child must meet specific criteria:
- Be under 17 years old at the end of the tax year.
- Be the taxpayer’s biological child, stepchild, foster child, sibling, half-sibling, or a descendant of one of these relatives (such as a grandchild, niece, or nephew).
- Have lived with the taxpayer for more than half the year.
- Not provide more than half of their own financial support.
- Be claimed as a dependent on the taxpayer’s return.
- Not file a joint tax return, unless only to claim a refund of withheld or estimated taxes.
- Be a U.S. citizen, U.S. national, or U.S. resident alien.
- Have a valid Social Security number issued before the tax return due date.
Amount
The maximum credit amounts for the CTC and ACTC are as follows:
| Credit Type | Maximum Amount per Child |
|---|---|
| Child Tax Credit (CTC) | $2,000 |
| Additional Child Tax Credit (ACTC) | $1,700 (refundable portion) |
The credit starts to phase out once a taxpayer’s adjusted gross income (AGI) exceeds:
| Filing Status | Phase-Out Threshold |
|---|---|
| Single or Head of Household | $200,000 |
| Married Filing Jointly | $400,000 |
Claiming
To claim the CTC or ACTC, taxpayers must:
- Report their qualifying children and dependents on Form 1040.
- Complete Schedule 8812 (Credits for Qualifying Children and Other Dependents).
- Ensure all required information is accurate and submitted before the tax deadline.
Restrictions
Some limitations apply when claiming the ACTC:
- If a taxpayer or their spouse (when filing jointly) submits Form 2555 or Form 2555EZ to exclude foreign-earned income, they cannot claim the ACTC.
- The refundable portion (ACTC) is limited to a maximum of $1,700 per child.
Maximizing
To maximize tax savings, consider these tips:
- File electronically – Reduces errors and speeds up refunds.
- Check for other credits – Look into the Earned Income Tax Credit (EITC) for additional benefits.
- Use tax software or a professional – They can help identify all deductions and credits available.
The Child Tax Credit and Additional Child Tax Credit are valuable benefits for families, helping to lower tax bills and, in some cases, provide refunds. By knowing eligibility requirements and income limits, taxpayers can ensure they claim the correct amount and receive the maximum financial relief possible.
FAQs
What is the difference between CTC and ACTC?
CTC is non-refundable, while ACTC is a refundable portion of the credit.
How much is the Child Tax Credit per child?
The maximum CTC per child is $2,000, with up to $1,700 refundable.
Who qualifies for the CTC and ACTC?
Children under 17 meeting IRS dependency and residency requirements.
What income limits apply to CTC/ACTC?
Phase-out begins at $200,000 ($400,000 for married filing jointly).
How do I claim the Child Tax Credit?
File Form 1040 and attach Schedule 8812 to your tax return.
