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Pub. 972, Child Tax Credit 2004 Tax Year

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This is archived information that pertains only to the 2004 Tax Year. If you
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Table of Contents

Child Tax Credit

This credit is for people who have a qualifying child as defined on this page. It is in addition to the credit for child and dependent care expenses (on Form 1040, line 47, or Form 1040A, line 29) and the earned income credit (on Form 1040, line 65a, or Form 1040A, line 41a).

The maximum amount you can claim for the credit is $1,000 for each qualifying child.

Qualifying Child

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

  1. Claimed as your dependent on line 6c of Form 1040 or Form 1040A.

  2. Under age 17 at the end of 2004.

  3. Your:

    1. Son, daughter, adopted child, stepchild, or a descendant of any of them (for example, your grandchild);

    2. Brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew), whom you cared for as you would your own child;

    3. Foster child (any child placed with you by an authorized placement agency whom you cared for as you would your own child).

  4. A U.S. citizen or resident alien.

Caution on qualified child
The above requirements are not the same as the requirements to be a qualifying child for the earned income credit.

Adopted child.   An adopted child is always treated as your own child. An adopted child includes a child placed with you by an authorized placement agency for legal adoption even if the adoption is not final. An authorized placement agency includes any person or court authorized by state law to place children for legal adoption.

Limits on the Credit

You must reduce your child tax credit if either (1) or (2) applies.

  1. The amount on Form 1040, line 45, or Form 1040A, line 28, 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.

  2. Your modified adjusted gross income (AGI) is above the amount shown below for your filing status.

    1. Married filing jointly – $110,000.

    2. Single, head of household, or qualifying widow(er) – $75,000.

    3. Married filing separately – $55,000.

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, your modified AGI is the same as your AGI.

AGI.   Your AGI is the amount on Form 1040, line 37, or Form 1040A, line 22.

Claiming the Credit

To claim the child tax credit, you must file Form 1040 or Form 1040A. You cannot claim the child tax credit on Form 1040-EZ. You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child.

Taxable Earned Income

You will need to figure your taxable earned income using one of the worksheets in this publication if you are completing the Line 11 Worksheet (page 6) or Form 8812. Form 1040 filers, use the worksheet on page 8 to figure your taxable earned income. Form 1040A filers, use the worksheet on page 9.

Additional Child Tax Credit

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.

  1. Make sure you figured the amount, if any, of your child tax credit.

  2. If you answered “Yes” on line 4 or line 5 of the Child Tax Credit Worksheet in the Form 1040 or Form 1040A instructions (or on line 13 of the Child Tax Credit Worksheet in this publication), use Form 8812 to see if you can take the additional child tax credit.

  3. If you have an additional child tax credit on line 13 of Form 8812, carry it to Form 1040, line 67 or Form 1040A, line 42.

  • Child Tax Credit Worksheet. page 1
  • Child Tax Credit Worksheet. page 2
  • Line 11 worksheet page 1
  • Line 11 worksheet page 2

    • 1040 Filers - Taxable Earned Income Worksheet

    Before you begin:  

    ✓Use this worksheet only if you were sent here from the Line 11 Worksheet on page 6 of this publication or line
    4a of Form 8812, Additional Child Tax Credit.
    ✓Disregard community property laws when figuring the amounts to enter on this worksheet.
    ✓If married filing jointly, include your spouse's amounts with yours when completing this worksheet.
     
     
    1. a. Enter the amount from Form 1040, line 7 1a.  
      b. Enter the amount of any nontaxable combat pay received. Also enter this amount on Form 8812, line 4b. This amount should be shown in Form(s) W-2, box 14, with code Q. 1b.  
        Next, if you are filing Schedule C, C-EZ, F, or SE, or you received a Schedule K-1 (Form 1065 or Form 1065-B), go to line 2a. Otherwise, skip lines 2a through 2e and go to line 3.    
    2. a. Enter any statutory employee income reported on line 1 of Schedule C or C-EZ 2a.  
      b. Enter any net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code K1.* Reduce this amount by any unreimbursed nonfarm partnership expenses you deducted on Schedule E. Do not include any statutory employee income or any other amounts exempt from self-employment tax. Options and commodities dealers must add any gain or subtract any loss (in the normal course of dealing in or trading section 1256 contracts) from section 1256 contracts or related property 2b.  
      c. Enter any net farm profit or (loss) from Schedule F, line 36, and from farm partnerships, Schedule K-1 (Form 1065), box 14, code A.* Reduce this amount by any unreimbursed farm partnership expenses you deducted on Schedule E. Do not include any amounts exempt from self-employment tax 2c.      
      d. If you used the farm optional method to figure net earnings from self-employment, enter the amount from Schedule SE, Section B, line 15. Otherwise, skip this line and enter on line 2e the amount from line 2c 2d.      
      e. If line 2c is a profit, enter the smaller of line 2c or line 2d. If line 2c is a (loss), enter the (loss) from line 2c. 2e.  
    3. Combine lines 1a, 1b, 2a, 2b, and 2e. If zero or less, stop. Do not complete the rest of this worksheet. Instead, enter -0- on line 2 of the Line 11 Worksheet on page 6 or line 4a of Form 8812, whichever applies 3.  
    4. Enter any amount included on line 1a that is:            
      a. A scholarship or fellowship grant not reported on Form W-2 4a.      
      b. For work done while an inmate in a penal institution (enter “PRI” and this amount on the dotted line next to line 7 of Form 1040) 4b.      
      c. A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (enter “DFC” and this amount on the dotted line next to line 7 of Form 1040). This amount may be shown in box 11 of your Form W-2. If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. 4c.      
    5. a. Enter any amount included on line 3 that is also included on Form 2555, line 41, or Form 2555-EZ, line 18. Do not include any amount that is also included on line 4a, 4b, or 4c above 5a.          
      b. Enter the amount, if any, from Form 2555, line 42, that is also deducted on Schedule C, C-EZ, or F, or included on Schedule E in partnership net income or (loss) 5b.          
      c. Subtract line 5b from line 5a 5c.      
    6. Enter the amount from Form 1040, line 30 6.      
    7. Add lines 4a through 4c, 5c, and 6 7.  
    8. Subtract line 7 from line 3 8.  
       

    • If you were sent here from the Line 11 Worksheet on page 6, enter this amount on line 2 of that worksheet.

    • If you were sent here from Form 8812, enter this amount on line 4a of that form.

    		    
    *If you have any Schedule K-1 amounts and you are not required to file Schedule SE, complete the appropriate line(s) of Schedule SE, Section A. Put your name and social security number on Schedule SE and attach it to your return.  
                     

    1040A Filers - Taxable Earned Income Worksheet

    Before you begin:  
    ✓Use this worksheet only if you were sent here from the Line 11 Worksheet on page 6 of this publication.
    ✓Disregard community property laws when figuring the amounts to enter on this worksheet.
     
                 
    1. a. Enter the amount from Form 1040A, line 7 1a.      
      b. Enter the amount of any nontaxable combat pay received. Also enter this amount on Form 8812, line 4b. This amount should be shown in Form(s) W-2, box 14, with code Q. 1b.      
      c. Add lines 1a and 1b.     1c.  
    2. Enter any amount included on line 1a that is:        
      a. A scholarship or fellowship grant not reported on Form W-2 2a.      
      b. For work done while an inmate in a penal institution (enter “PRI” and this amount next to line 7 of Form 1040A) 2b.      
      c. A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (enter “DFC” and this amount next to line 7 of Form 1040A). This amount may be shown in box 11 of your Form W-2. If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity 2c.      
    3. Add lines 2a through 2c 3.  
    4. Subtract line 3 from line 1c. Enter the result here and on line 2 of the Line 11 Worksheet on page 6 4.  
                 

    Detailed Example

    Steve and Gretchen Leaf have four children who are all qualifying children for the child tax credit. Steve and Gretchen's adjusted gross income (AGI) (Form 1040, line 37) is $112,000. This amount represents Steve's salary and is considered taxable earned income. They will file a joint return. Assume that their tax (Form 1040, line 45) is $2,000.

    Steve and Gretchen have the 2004 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 51 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 that begins on page 4.

    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), multiply 4 by $1,000, and enter the result ($4,000) in the box for line 1.

    2. They enter their AGI ($112,000) 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 $112,000 and $0 and enter the result ($112,000) 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 ($112,000) is more than the amount on line 5 ($110,000). They subtract line 5 ($110,000) from line 4 ($112,000) and enter the result ($2,000) in the box for line 6.

    7. They multiply the amount on line 6 ($2,000) by 5% (.05) and enter the result ($100) in the box for line 7.

    8. They check the “Yes” box in line 8 since the amount on line 1 ($4,000) is more than the amount on line 7 ($100). They subtract line 7 ($100) from line 1 ($4,000) and enter the result ($3,900) in the box for line 8.

    9. They enter the amount from line 45 of their Form 1040 ($2,000) in the box for line 9.

    10. Steve and Gretchen did not have any of the credits on lines 46, 47, 48, 49, or 50 of Form 1040, so they enter -0- in the box for line 10.

    11. They check the “No” box on line 11 because they are not claiming any of the credits shown on 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 ($2,000) and enter the result ($2,000) in the box for line 12.

    13. They check the “Yes” box in line 13 since the amount on line 8 ($3,900) is more than the amount on line 12 ($2,000). They enter the amount from line 12 ($2,000) in the box for line 13. Their child tax credit is $2,000. They enter $2,000 on line 51 of their Form 1040.

    Steve and Gretchen read the TIP in the worksheet and find that they may be able to take the additional child tax credit because they checked the “Yes” box in line 13.

      Steve and Gretchen complete their Form 1040 through line 66 and use Form 8812 to see if they can claim the additional child tax credit.

    Completing Form 8812.   

    1. They enter the amount from line 8 of their Child Tax Credit Worksheet ($3,900) on line 1.

    2. On line 2, they enter the amount of their child tax credit ($2,000) from line 51 of their Form 1040.

    3. Steve and Gretchen subtract the amount on line 2 ($2,000) from the amount on line 1 ($3,900) and enter the result ($1,900) on line 3.

    4. Before completing line 4, they read the instructions on the back of the form and answer “No” to each of the four questions. They enter the amount from line 7 of their Form 1040 ($112,000) on line 4a.

    5. Since the amount on line 4a ($112,000) is more than $10,750, they check the “Yes” box and subtract $10,750 from the amount on line 4a ($112,000) and enter the result ($101,250) on line 5.

    6. They multiply the amount on line 5 ($101,250) by 15% (.15) and enter the result ($15,188) on line 6. Next, they are asked if they have three or more qualifying children. Steve and Gretchen check the “Yes” box. Since line 6 ($15,188) is more than line 3 ($1,900), they skip Part II and enter the amount from line 3 ($1,900) on line 13. This $1,900 is their additional child tax credit. They also enter this amount on line 67 of their Form 1040.

    Steve and Gretchen will get a child tax credit of $2,000 and an additional child tax credit of $1,900 for the year.

  • Leaf's Child Tax Credit Worksheet page 1
  • Leaf's Child Tax Credit Worksheet page 2
  • Leaf's Filled-in Form 8812
    • Paperwork Reduction Act Notice.   We ask for the information on the worksheets in this publication to carry out the Internal Revenue laws of the United States. You are required to give us the information if requested. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

      You are not required to provide the information requested on a form (or worksheet in this publication) that is subject to the Paperwork Reduction Act unless the form (or publication) displays a valid OMB control number. Books or records relating to a form, its instructions, or this publication must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.

      The time needed to complete and file the worksheets in this publication will vary depending on individual circumstances. The estimated average time is:
    Recordkeeping 12 min.
       
    Learning about the law or the worksheets 8 min.
       
    Preparing the worksheets 1 hr., 14 min.
    If you have comments concerning the accuracy of these time estimates or suggestions for making these worksheets simpler, we would be happy to hear from you. See Comments and suggestions, earlier.

    How To Get Tax Help

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      For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS—How To Get Help With Unresolved Tax Problems.

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    Buy the CD-ROM from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $22 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $22 (plus a $5 handling fee). The first release is available in early January and the final release is available in late February.

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    It is available in early April. You can get a free copy by calling 1-800-829-3676 or by visiting www.irs.gov/smallbiz.

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