This post has been updated for 2018, 2019, & through the 2025 tax years (post tax reform).
As part of the Republican Tax Cut & Jobs Act (tax reform), there were some pretty notable changes to the Child Tax Credit. Those changes take effect for the 2018 calendar year and also apply to 2019 and beyond.
What is the Child Tax Credit?
The Child Tax Credit is a significant tax credit for those with qualified dependent children under age 17 (more on qualifications in a bit).
The Child Tax Credit is a non-refundable income tax credit (with the possibility for it to become refundable through claiming the Additional Child Tax Credit). With a non-refundable credit, if your credit exceeds your income tax liability, then you won’t get a refund for the difference. On the plus side, a credit is a subtraction from actual taxes owed, which is much more valuable than a deduction (a subtraction from your actual income).
What is the “Additional Child Tax Credit”?
The name is somewhat confusing, but the Additional Child Tax Credit means that if your income is below a certain threshold and you have sufficient earned income, and your Child Tax Credit exceeds the taxes you owe, you are eligible to get a refund for the difference. This is determined on IRS Schedule 8812.
In other words, filing this separate schedule form can make the Child Tax Credit refundable. The amount that may be refunded is equal to 15% of earned income (see my post on the earned income tax credit, which can be claimed separately as well) above $3,000.
How Do I Claim the Child Tax Credit
If you have qualifying children, in addition to filling out the appropriate lines in your 1040 form, you will also want to submit IRS Schedule 8812.
The 2018 & 2019 Child Tax Credit Amount
The child tax credit was increased to $2,000 per qualifying child and will be refundable up to $1,400, subject to phaseouts. This is up from the prior $1,000 amount.
2018 & 2019 Child Tax Credit Income Levels & Phaseout
Phaseouts, which are not indexed for inflation, will begin with a modified adjusted gross income (MAGI) of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers.
New $500 Additional Dependent Credit
There is also a new $500 nonrefundable credit for other qualifying dependents (for example, older adults). If you provide half the financial support for a parent or grandparent, stepparent, aunt or uncle, niece or nephew, in-laws, or someone who lives in your home all year long, you may be able to qualify for this $500 credit, as long as the dependent doesn’t earn more than $4,150 (2018). These dependents may include dependent children who are age 17 or older at the end of 2018.
The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien. The credit is calculated with the child tax credit in the form instructions. The total of both credits is subject to a single phase out when adjusted gross income exceeds $200,000, or $400,000 if married filing jointly.
What is a “Qualified Child” for the Child Tax Credit?
A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
- Age Test: To qualify, a child must have been under age 17 – age 16 or younger – at the end of the year.
- Relationship Test: To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals (includes your grandchild, niece, or nephew). An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support Test: In order to claim a child for this credit, the child must not have provided more than half of their own support for the year.
- Dependent Test: You must claim the child as a dependent and that you provided at least half the child’s support during the tax year.
- Citizenship Test: To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence Test: The child must have lived with you for more than half of the tax year. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
- Social Security Test: Beginning with Tax Year 2018, your child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit. Children with an ITIN can’t be claimed for either credit. If your child’s immigration status has changed so that your child is now a U.S. citizen or permanent resident but the child’s social security card still has the words “Not valid for employment” on it, ask the SSA for a new social security card without those words. If your child doesn’t have a valid SSN, your child may still qualify you for the Credit for Other Dependents. If your dependent child lived with you in the United States and has an ITIN, but not an SSN, issued by the due date of your 2018 return (including extensions), you may be able to claim the new Credit for Other Dependents for that child.
There is a qualifying child questionnaire on the IRS website to help you determine eligibility, if you are unsure or want to double-check.
Can you Claim a Child Tax Credit in the Year the Child was Born?
After looking at the ‘residence test’ above, I was left wondering whether or not you could claim the Child Tax Credit in the year the child was born if the child was born in the second half of the year. Publication 972 lists this as one of the exceptions in which you can claim the credit.
Tax Credits for Child Care
In addition to the Child Tax Credit, there are also tax credits for child care that you should look into, if you’ve paid for child care.