Understanding Eligibility Requirements For the Additional Child Tax Credit

This is the refundable part of the Child Tax Credit. Families that owe less than the Child Tax Credit amount that the IRS sets for them are able to take advantage of this, as it refunds the unused part of the credit back to the family.

The Full Breakdown

To understand how the Child Tax Credit works, it's important to know a bit about the nature of tax credits in general. They're designed to give benefits to qualified taxpayers in an effort to reduce liability on taxes. If Mary has a total bill of four thousand dollars and is eligible for a credit totaling two thousand dollars, she can subtract the credited amount and just pay the difference. Not all tax credits are refundable, but those that are will be returned to the payer. Let's say Mary's next tax credit amounts to six thousand, it's refundable. In this case, she will be given a check for two thousand dollars, as that is the total amount after she pays the taxes.

If a person has children, they may qualify for the Child Tax Credit group, which helps to defray the cost of child-rearing.

This group allows an eligible person to reduce their liability up to amounts of one thousand dollars per child. There are a few requirements that the child must meet for eligibility:

The Child Tax Credit allows an eligible tax filer to reduce his tax liability by up to $1,000 per child. To be eligible for the Child Tax Credit, the child or dependent must:

• Being 16 years of age or below prior the end of the tax year
• Be a born US citizen or a resident alien
• Lived with the claimant for over half the tax year
• Claimed as a dependent
• Provided less than half of their own financial support

This type of credit is non-refundable, so while it can reduce the bill to a zero sum, no extra money will be returned to the taxpayer. If a person claims more in tax credit than they owe, they will not receive the surplus.

However, Additional Child Tax Credit makes keeping the unused portion possible. If a family already qualifies for the regular group, they might also be eligible for this one. It makes the most sense for those who owe a lesser amount of the Child Tax Credit and would like to receive the surplus.

A 1040 Form contains a section on Schedule 8812 as a metric to assess qualifications here. Anyone with annual income exceeding three thousand and with more than three eligible children can use the Additional Credit.

The sum of the credit is largely determined by looking at fifteen percent of the taxable earned income that is over the three thousand dollar marker, going up to the maximum. This is then used as the refundable amount.

If a taxpayer who has two dependents has an income of twenty-eight thousand, then twenty-five of that is income over the three thousand dollar threshold. Fifteen percent of that would be three thousand, seven hundred and fifty. As this is a greater amount than the ceiling total of two thousand, the taxpayer will receive all unused credit. The total amount of the refund cannot exceed the fifteen percent above the initial three thousand dollars. Therefore, any amount above this would be lost. If total income is sitting at twelve thousand, the calculations would be fifteen percent above nine-thousand, or one thousand three hundred and fifty. In this case, that is the total amount for which this person is eligible, as it can never exceed fifteen percent above three thousand.

If a family or single parent has an income threshold below the three thousand dollar marker, eligibility for the Additional Child Tax Credit is still a possibility. In this case, the individual or family needs a minimum of three qualified dependents and paid an amount to Social Security that exceeds their total annual earned-income credit. Again, taxpayers claim this amount using Schedule 8812 of the 1040 Form. Keep in mind, however, that even with these different criteria, the monies are regulated by the same limits set by the Child Tax Credit for that group.