The Child Tax Credit (CTC) is a federal tax credit worth up to $1,000 for each qualifying child under age 17 claimed on a worker’s tax return. The CTC has two components. First, the non-refundable CTC reduces any income taxes owed. If any of the CTC remains after the income tax has been eliminated, the refundable “Additional CTC” delivers a tax refund to some workers, even if they owe no income tax.
The CTC is worth up to $1,000 per child. The amount of the CTC refund is based on income and family size. For more details about the credit amount, see the EITC and CTC Eligibility Comparison Chart and the chart of CTC Benefits.
CLAIMING THE CREDIT
To claim the CTC, a worker must file a federal income tax return. Workers can file Form 1040 or 1040A, but not 1040EZ. Workers may get any remaining CTC as an additional CTC refund by filing Schedule 8812, “Additional Child Tax Credit” with their tax return.
A child may not be claimed for the CTC if the child provides over one-half of his or her own support; the worker must claim the dependent exemption for the child.
Earned Income Includes:
Taxable Earned Income:
- Wages, salaries, and tips
- Union strike benefits
- Long-term disability benefits received prior to minimum retirement age
- Net earnings from self-employment
- Gross income received as a statutory employee
- Exception: Military combat pay is not taxable earned income, up to the highest pay level for enlisted personnel. Combat pay is counted to determine eligibility for the CTC.
Earned Income does not include:
- Interest and dividends
- Social security and railroad retirement benefits
- Welfare benefits
- Workfare payments
- Pensions or annuities
- Veterans’ benefits (including VA rehabilitation payments)
- Workers’ compensation benefits
- Alimony and Child Support
- Non-taxable foster care payments
- Unemployment compensation (insurance)
- Earnings for work performed while an inmate at a penal institution
- Taxable scholarship or fellowship grants that are not reported on Form W-2
Nontaxable earned income:
- Salary deferrals (i.e. under a 401(k) plan)
- Military basic housing and subsistence allowances
- Meals or lodging for the convenience of a taxpayer’s employer
- Housing allowance or rental value of a parsonage for the clergy
- Excludable dependent care benefits
- Salary reductions (i.e. under a cafeteria plan)
- Anything else of value you get from an employer for services you performed even if it is not taxable
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