The child tax credit and its phase out

How it works

A child qualifies when the child is under 17 at the end of the year, lived with the taxpayer for more than half the year, is claimed as a dependent, and has a Social Security number that allows work. The credit is this year's official child tax credit amount (not yet verified here; see the official source below) per child. Once modified adjusted gross income passes this year's official ctc phaseout single start (not yet verified here; see the official source below) for a single filer or this year's official ctc phaseout married start (not yet verified here; see the official source below) for a married couple filing jointly, the credit falls by this year's official ctc phaseout reduction per 1000 (not yet verified here; see the official source below) for every $1,000 of income above the line, rounded up to the next $1,000. The credit first wipes out income tax owed, and a family that owes less than the credit may receive part of the rest as a refund through the additional child tax credit, which has its own door. The credit is claimed on the main return with a schedule the IRS provides.

What it gives

It lowers the tax bill dollar for dollar rather than lowering taxable income.

It applies to each child, so a family with three qualifying children receives three times the amount.

The income line where the phase out starts is high enough that most families receive the full amount.

What it costs, or where the catch is

A child who turns 17 during the year no longer qualifies for that year, even on the last day of December.

A child without a work eligible Social Security number does not qualify, though the smaller credit for other dependents may apply.

The credit only reduces tax owed, and the refundable part has its own rules and a lower cap.

A worked example

Nadia and Omar file jointly with two children, ages 9 and 14, and income of $96,000. Both children qualify, so the couple's credit is twice the per child amount. Their income tax before credits comes to $5,400, and the two credits are subtracted from that figure first. If the credit total were $4,000, their tax would drop to $1,400, which is $5,400 minus $4,000. Their neighbor earns far above the phase out line, and his credit shrinks by a set amount for every $1,000 above it.

Where it goes wrong

The common miss is a divorced parent claiming a child who lived with the other parent for more of the year, which the IRS resolves with its tie breaker rules.

Who confirms it for you

For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

IRS: Child tax credit. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.