Child Tax Credit (CTC) reduces the tax liability to IRS. It is an important credit that is worth as much as $2,000 per qualifying child.
Changes for 2018 tax year
Below are the changes based on the President Trump signed Tax Cuts and Jobs Act:
- 1) The child must have a valid SSN to qualify for the credit. Previously until 2017, children with ITINs were eligible for the CTC. So it is important for taxpayers to update their W4 form to not list kids with ITINs as dependents for tax purposes
- 2) The credit amount increased from $1,000 to $2,000 per qualifying child
- 3) The credit is refundable up to $1,400. So if any part of your credit is left over after eliminating your tax liability, the IRS will give you a refund of up to $1,400. And that $1,400 can be expected to increase a little in future years because the new tax law indexes it to keep pace with inflation
- 4) The CTC phases out if Adjusted Gross Income (AGI) exceeds $200,000 for single filers and $400,000 for joint filers (The phase out limit in 2017 was $75,000 for single filers and $100,000 for joint filers)
- 5) $500 non-refundable credit for each non-child dependent
- 6) The earned income threshold is lowered to $2,500
All changes to the new Child Tax Credit expire after December 31, 2025.
Which Dependents Are Eligible for the Child Tax Credit
- 1) Age Test: The child was under age 17 (so 16 or younger) at the end of the tax year.
- 2) Relationship Test: The child is your daughter, son, stepchild, foster child, adopted child, brother, sister, stepbrother, stepsister, half sister or half brother. The child can also be the direct descendant of any of those just mentioned (e.g. your grandchild, niece or nephew).
- 3) Support Test: The child did not provide more than half of their own “support.” This is money they use for living expenses. The child also cannot file a joint return that year.
- 4) Dependent Test: The child must be claimed as your dependent on your federal tax return.
- 5) Citizenship Test: The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. For the 2018 tax year, the child must also have a Social Security Number.
- 6) Resident Test: The child must have lived with you for more than half of the tax year.
How to claim Child Tax Credit
Eligible filers can claim the CTC on Form 1040, line 12a, or on Form 1040NR, line 49.
When you file your taxes with UNO financials, our team will ask you relevant questions to determine how much of the CTC you are eligible to receive.