Detailed Example

Steve and Gretchen Leaf have 4 children, Jeremy, Joshua, Justin, and Jordan who are all qualifying children for the child tax credit. Steve and Gretchen's adjusted gross income (AGI) (Form 1040, line 34) is $140,000. Their tax (Form 1040, line 40) is $27,035, figured using Tax Rate Schedule Y-1. They will file a joint return.

Steve and Gretchen have the 2000 Form 1040 tax package and instructions. They want to see if they qualify for the child tax credit, so they follow the steps for line 47 in the instructions.

Step 1. In Step 1 of those instructions Steve and Gretchen determine all four children qualify for the child tax credit.

Step 2. The Leafs check the box in column (4) of line 6c on Form 1040 for each child.

Step 3. In Step 3 the Leafs find out they must use Publication 972 to figure their child tax credit because their AGI is more than $110,000. When they read Publication 972, they find out they must complete the Child Tax Credit Worksheet which begins on page 3.

Child Tax Credit Worksheet. page 1

Child Tax Credit Worksheet. page 2

Line 11 worksheet page 1

Line 11 worksheet page 2

Completing the Child Tax Credit Worksheet. Steve and Gretchen fill out the worksheet (shown here) to find out how much child tax credit they can claim.

1. Steve and Gretchen enter the number of qualifying children (4) and multiply 4 by $500 and enter the result ($2,000) in the box for line 1.
2. They enter their AGI ($140,000) in the box for line 2.
3. They enter -0- in the box for line 3 since they did not exclude any income from Puerto Rico or any income on Form 2555, Form 2555-EZ, or Form 4563.
4. They add $140,000 and $0 and enter the result ($140,000) in the box for line 4.
5. They enter $110,000 in the box for line 5 since they will file a joint return.
6. They check the "Yes" box in line 6 since the amount on line 4 ($140,000) is more than the amount on line 5 ($110,000). They subtract line 5 ($110,000) from line 4 ($140,000) and enter the result ($30,000) in the box for line 6.
7. They multiply the amount on line 6 ($30,000) by 5% (.05) and enter the result ($1,500) in the box for line 7.
8. They check the "Yes" box in line 8 since the amount on line 1 ($2,000) is more than the amount on line 7 ($1,500). They subtract line 7 ($1,500) from line 1 ($2,000) and enter the result ($500) in the box for line 8.
9. They enter the amount from line 40 of their Form 1040 ($27,035) in the box for line 9.
10. Steve and Gretchen did not have any of the credits on lines 44, 45, or 46 of Form 1040, so they enter -0- in the box for line 10.
11. They check the "No" box in line 11 because even though they are claiming more than $1,500 on line 1, they are not claiming any of the credits shown in line 11. They enter -0- in the box for line 11.
12. They subtract the amount on line 11 ($0) from the amount on line 9 ($27,035) and enter the result ($27,035) in the box for line 12.
13. They check the "No" box in line 13 since the amount on line 8 ($500) is not more than the amount on line 12 ($27,035). They enter the amount from line 8 ($500) in the box for line 13. Their child tax credit is $500. They enter $500 on line 47 of their Form 1040.

Steve and Gretchen will not be able to take the additional child tax credit because they checked the "No" box in line 13.

Leaf's Child Tax Credit Worksheet page 1

Leaf's Child Tax Credit Worksheet page 2

Form 8812

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