Publication 17: Your Federal Income Tax; Child Tax Credit

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

Important Changes

Child tax credit increased. For 2003, the maximum child tax credit is increased to $1,000 for each qualifying child. But you must reduce your credit by any advance payment you received in 2003.

Advance payment of child tax credit. Advance payments of the increase in the child tax credit were made to some individuals in 2003. If you received an advance payment, you will need to reduce the credit you can claim on your return by the advance payment you already received. (See the filled-in Child Tax Credit Worksheet shown later.) The amount of your advance payment (before offset) is shown on Notice 1319. This notice was mailed to you in 2003 if you received an advance payment.

Introduction

The child tax credit is a credit that you may be able to take on your tax return. It may reduce your tax by as much as $1,000 for each of your qualifying children.

The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit.

The child tax credit and the additional child tax credit should not be confused with the child and dependent care credit discussed in chapter 34.

If you have no tax.

Credits, such as the child tax credit, the adoption credit, or the credit for child and dependent care expenses, are used to reduce tax. If your tax on line 43 (Form 1040) or line 28 (Form 1040A) is zero, do not figure the child tax credit because there is no tax to reduce. However, you may qualify for the additional child tax credit on line 65 (Form 1040) or line 42 (Form 1040A).

Useful Items - You may want to see:

A qualifying child for purposes of the child tax credit must be all of the following.

Under age 17 at the end of 2003.
A citizen or resident of the United States.
Claimed as your dependent.
Your:
1. Son, daughter, adopted child, stepchild, or a descendent of any of them (for example, your grandchild),
2. Brother, sister, stepbrother, stepsister, or a descendent of any of them (for example, your niece or nephew) if you care for the individual as you would your own child, or
3. Eligible foster child.

Example.

Your son turned 17 on December 30, 2003. He is a citizen of the United States and you claimed him as a dependent on your return. He is not a qualifying child for the child tax credit because he was not under age 17 at the end of 2003.

Adopted child.

An adopted child is always treated as your own child. A child placed with you by an authorized placement agency for legal adoption is an adopted child even if the adoption is not final.

Eligible foster child.

For the child tax credit, a person is your eligible foster child if both of the following are true.

The child is placed with you by an authorized placement agency.
You cared for that child as you would your own child.

Kidnapped child.

A kidnapped child is treated as a qualifying child for the child tax credit if both of the following statements are true.

The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
The child qualified as your dependent for the part of the year before the kidnapping.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:

The year there is a determination that the child is dead, or
The year the child would have reached age 16.

The maximum credit you can claim is $1,000 for each qualifying child. But you must reduce your credit by any advance payment you received in 2003.

The amount on line 43 (Form 1040) or line 28 (Form 1040A) is less than the credit. If this amount is zero, you cannot take this credit because there is no tax to reduce. But you may be able to take the additional child tax credit. See Additional Child Tax Credit, later.
Your modified adjusted gross income (AGI) is above the amount shown below for your filing status.

Modified AGI.

For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you.

Any amount excluded from income because of the exclusion of income from
Puerto Rico.
Any amount on line 43 or line 48 of Form 2555, Foreign Earned Income.
Any amount on line 18 of Form 2555–EZ, Foreign Earned Income Exclusion.
Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa.

If you do not have any of the above, modified AGI is the AGI amount on line 35 (Form 1040) or line 22 (Form 1040A).

To claim the child tax credit, you must file Form 1040 or Form 1040A. You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child.

Answer the Questions in your form instructions for line 49 (Form 1040) or line 33 (Form 1040A) to find out which child tax credit worksheet you can use to figure the credit.

If you answer “Yes” to question 1, 2, or 3 in your Form 1040 instructions or question 1 or 2 in your Form 1040A instructions, you must complete the child tax credit worksheet in Publication 972. Otherwise, you can use the Child Tax Credit Worksheet in your Form 1040 or Form 1040A instructions. (See the filled-in example, later.)

Amy Brown files as head of household and has two dependent children under age 17. The children are qualifying children for purposes of the child tax credit. Amy's only income is her salary of $23,500. Amy chooses to itemize her deductions and files Form 1040. Her AGI, shown on line 35 of her Form 1040, is $23,500. This is her taxable earned income.

Amy received an advance payment of the child tax credit in 2003. The amount was $800. She also received Notice 1319 indicating $800 as the amount of the payment.

Amy does not file Form 2555, 2555–EZ, or 4563. She does not exclude income from Puerto Rico. Her modified AGI is $23,500.

Amy's tax, shown on line 43 of her Form 1040, is $703. She claims a $437 credit for child and dependent care expenses on line 45. She claims a $2,141 earned income credit on line 63. She has no other credits.

After answering the Questions in the Form 1040 instructions for line 49, she completes the child tax credit worksheet to figure her child tax credit of $266. Amy's completed questions and child tax credit worksheet are shown later.

Amy reads the TIP in the worksheet and finds that she may be able to take the additional child tax credit. See Additional Child Tax Credit and Amy's completed Form 8812, later.

This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.

How to claim the additional child tax credit.

To claim the additional child tax credit, follow the steps below.

Make sure you figured the amount, if any, of your child tax credit. See Claiming the Credit, earlier.
Use Form 8812 to see whether you can take the additional child tax credit if you answered “Yes” on
1. Line 6 or line 7 of the Child Tax Credit Worksheet in the Form 1040 or Form 1040A instructions, or
2. Line 15 of the Child Tax Credit Worksheet in Publication 972.
If you have an additional child tax credit on line 13 of Form 8812, carry it to line 65 (Form 1040) or line 42 (Form 1040A).

Taxable earned income.

Generally, for purposes of the additional child tax credit, your taxable earned income is the amount on line 7 of Form 1040 or Form 1040A. See the instructions for Form 8812 to figure your taxable earned income.

The child tax credit decreases your tax. You can check your tax withholding by using Publication 919, How Do I Adjust My Tax Withholding.

If you are having too much tax withheld, and you prefer to have the money during the year, you may be able to decrease your withholding. You do this by completing a new Form W–4 and giving it to your employer.