Publication 17 (2005), Your Federal Income Tax

What's New

Qualifying child. The definition of a qualifying child has changed. See Qualifying Child.

New Form 8901. If you have a qualifying child who is not your dependent, you must complete and file Form 8901, Information on Qualifying Children Who Are Not Dependents.

Katrina Emergency Tax Relief Act of 2005. This Act provides tax relief for persons affected by Hurricane Katrina. Under the Act, if your 2005 earned income is less than your 2004 earned income, you may be able to use your 2004 earned income in figuring your additional child tax credit for 2005. See Publication 4492.

Introduction

The child tax credit is a credit that 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.

This chapter explains:

Who is a qualifying child.
How much is the credit.
How to claim the credit.
Why you should check your tax withholding.

The child tax credit and the additional child tax credit should not be confused with the child and dependent care credit discussed in chapter 32.

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 Form 1040, line 46, or Form 1040A, line 28, 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 68 (Form 1040) or line 42 (Form 1040A).

Useful Items - You may want to see:

Publication

972 Child Tax Credit

Form (and Instructions)

8812
Additional Child Tax Credit
8901
Information on Qualifying Children Who Are Not Dependents
W-4
Employee's Withholding Allowance Certificate

Qualifying Child

A qualifying child for purposes of the child tax credit is a child who:

Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild),
Was under age 17 at the end of 2005,
Did not provide over half of his or her own support for 2005,
Lived with you for more than half of 2005 (see Exception to “time lived with you” condition below), and
Was a U.S. citizen, a U.S. national, or a resident of the United States. If the child was adopted, see Adopted child below.

For each qualifying child you must either check the box on Form 1040 or Form 1040A, line 6c, column (4), or complete Form 8901 (if the child is not your dependent).

Example.

Your son turned 17 on December 30, 2005. 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 2005.

Exceptions to “time lived with you” condition. A child is considered to have lived with you for all of 2005 if the child was born or died in 2005 and your home was this child's home for the entire time he or she was alive. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or business, count as time lived at home.

There are also exceptions to the “time lived with you” condition for kidnapped children and children of divorced or separated parents. For details, see Residency Test, in chapter 3.

Qualifying child of more than one person. A special rule applies if your qualifying child is the qualifying child of more than one person. For details, see Special Test for Qualifying Child of More Than One Person, in chapter 3.

Adopted child. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

If you are a U.S. citizen or U.S. national and your adopted child lived with you as a member of your household all year, that child meets condition (5) above to be a qualifying child for the child tax credit.

Amount of Credit

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

Limits on the Credit

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

The amount on Form 1040, line 46 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.
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 38, 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 1040EZ. You must provide the name and identification number (usually a social security number) on your tax return (or Form 8901) for each qualifying child.

Answer the Questions in your form instructions for Form 1040, line 52 or Form 1040A, line 33 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.)

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.

Make sure you figured the amount, if any, of your child tax credit. See Claiming the Credit, earlier.
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 line 13 of the Child Tax Credit Worksheet in Publication 972, use Form 8812 to see if you can take the additional child tax credit.
If you have an additional child tax credit on line 13 of Form 8812, carry it to Form 1040, line 68 or Form 1040A, line 42.

Checking Your Withholding

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.

Example

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 $30,350. Amy chooses to itemize her deductions and files Form 1040. Her AGI, shown on line 38 of her Form 1040, is $30,350. This is her taxable earned income.

Amy does not file Form 2555, 2555-EZ, or 4563. She does not exclude income from Puerto Rico. Her modified AGI is $30,350.

Amy's tax, shown on line 46 of her Form 1040, is $1,334. She claims a $225 credit for child and dependent care expenses on line 48. She claims a $1,029 earned income credit on line 66a. She has no other credits.

After answering the Questions in the Form 1040 instructions for line 52, she completes the child tax credit worksheet to figure her child tax credit of $1,109. 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.

Please click here for the text description of the image.

Filled-in Questions for Amy Brown

This image is too large to be displayed in the current screen. Please click the link to view the image.

Filled-in child tax credit worksheet for Amy Brown