What is the Child Tax Credit (CTC)?

This tax credit helps offset the costs of raising kids and is worth up to $2,000 for each child.

Raising children is expensive—recent reports show that the cost of raising a child is over $200,000 throughout the child’s lifetime. The Child Tax Credit (CTC) can give you back money at tax time to help with those costs. Parents and caregivers can claim up to $2,000 for each child under 17 claimed on the tax return.

The CTC has two components. First, the credit reduces any income taxes you owe. If you make less than about $35,000, and your credit is more than the taxes you owe, you get the extra money back in your tax refund. This “refundable” portion is known as the Additional CTC.

What is the CTC worth?

Depending on your income and family size, the CTC is worth up to $2,000 per child under age 17. Up to $1,400 is refundable. CTC amounts start to phase-out when you make $200,000 ($400,000 for married couples). Each $1,000 of income above the phase-out level reduces your CTC amount by $50.

You may be able to claim some of the CTC as a refund if the credit amount is more than the taxes you owe. The following chart shows how much Additional Child Tax Credit you may be eligible to claim.

Am I eligible for the CTC?

There are three main criteria to claim the CTC:

  1. Income: You must have earned income more than $2,500. Earned income can be from wages, salary, tips, employer-based disability, self-employment income, military pay, or union strike benefits.
  2. Qualifying Child: Children claimed for the CTC must be a “qualifying child”. See below for details.
  3. Taxpayer Identification Number: You and your spouse need to have a social security number (SSN) or an Individual Taxpayer Identification Number (ITIN).

To claim children for the CTC, they must pass the following tests to be a “qualifying child”:

  1. Relationship: The child must be your son, daughter, grandchild, stepchild or adopted child; younger sibling, step-sibling, half-sibling, or their descendent; or a foster child placed with you by a government agency.
  2. Age: The child must be under 17.
  3. Residency: The child must live with you in the U.S. for more than half the year. Time living together doesn’t have to be consecutive. There is an exception for non-custodial parents who are permitted by a divorce agreement to claim the child as a dependent.
  4. Taxpayer Identification Number: Children claimed for the CTC must have a valid SSN. This is a change from previous years when children could have a SSN or an ITIN.
  5. Dependency: The child must be considered a dependent for tax filing purposes.

New in 2018 – Credit for Dependents

A $500 non-refundable credit is available for families with qualifying relatives. This includes children over 17 and children with an Individual Taxpayer Identification Number who otherwise qualify for the CTC. Additionally, qualifying relatives who are considered a dependent for tax purposes (like dependent parents), can be claimed for this credit.

Since this credit is non-refundable, it can only help reduce taxes owed. If you can claim both this credit and the CTC, this will be applied first to lower your taxable income.

How to claim the CTC

To claim the CTC, you must file a tax return. After the CTC eliminates any taxes you owe, you can claim any remaining CTC as a refund by submitting Schedule 8812, the “Additional Child Tax Credit” with your tax return.

Going to a paid tax preparer is expensive and reduces the benefits of a tax refund. Luckily, there are free options available. You can visit a Volunteer Income Tax Assistance (VITA) site to have IRS-certified volunteers accurately file your taxes for free. You can also visit MyFreeTaxes.com to file your own taxes for free online if your household income is less than $66,000.

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