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Child Tax Credit 2015, 2016

Depending on your income and the age of your children, you could score a hefty child tax credit and possibly earn a tax refund. In 2016, more lower-income individuals will qualify for a larger refundable tax credit.

And the child tax credit does not affect the exemptions you take for dependents. The credit is in addition to your exemptions.

To claim the credit you must meet these tests, to qualify for the credit:

  • The dependent must be a U.S. citizen or resident, and a blood or adoptive son, daughter, stepchild, or grandchild. Foster children qualify if they lived with you as members of your household all year.

You must report each qualifying child’s tax identification number (TIN) (usually the child’s Social Security number) on your return for the year that you take the credit.

Calculate your child tax credit using the worksheet provided in the instructions for Form 1040, or Form 1040A. You cannot claim the child tax credit on Form 1040EZ, or Form 1040NR-EZ.

TurboTax walks you through the qualification process step-by-step.

How Much You Get

In most cases, the child tax credit is limited to the amount of tax liability on your return (in other words, if your credit is bigger than your tax liability, your tax liability is just reduced to zero, and the rest of the credit is lost).

In certain cases, though, you can get a child tax credit refund when the credit exceeds your tax liability. This means that you would get a refund of the difference between your tax credit and what you owe in taxes. This refundable child tax credit is called the Additional Child Tax Credit, which you calculate on Form 8812.

For taxpayers with one or two children, the refundable portion of the child tax credit is the smaller of the unused portion of the child tax credit or fifteen percent of the person’s earned income over $3,000.

For taxpayers with three or more qualifying children, the refundable amount of the child tax credit is the smaller of the following two amounts:
1) The unused portion of the child tax credit
2) The larger of either:
a) 15% of a person’s earned income over $3,000
b) The sum of Social Security and Medicare taxes paid minus the earned income credit

The otherwise allowable child tax credit is phased out for taxpayers with modified adjusted gross income (defined below) above certain thresholds. The amount of the credit is reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer’s modified adjusted gross income exceeds the threshold amount. The threshold amount is:

  • $110,000 in the case of a joint return
  • $75,000 in the case of an unmarried individual 
  • $55,000 in the case of a married individual filing a separate return

The total you can take is $1,000 per child, although part of that can be a tax credit, and the rest in a refund. Families with three or more children can calculate the refundable credit as they did last year if it results in a larger amount.

If you pay the Alternative Minimum Tax, you can use the child tax credit to offset that.

Something to keep in mind: the child tax credit rate of $1000 per child has been extended.

You can use Turbo Tax Online to estimate and claim your Child Tax Credit. You can also find plenty of Free help & information to Prepare & File Your Taxes Online and get all the tax deductions and credits possible.