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Publication 17, Your Federal Income Tax 2006 Tax Year

34.   Child Tax Credit

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Table of Contents

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 the following.

  • Who is a qualifying child.

  • How much is the credit.

  • How to claim the credit.

  • Why you should check your tax withholding.

Caution
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 41 (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:

  1. Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild),

  2. Was under age 17 at the end of 2006,

  3. Did not provide over half of his or her own support for 2006,

  4. Lived with you for more than half of 2006 (see Exception to time lived with you below), and

  5. 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, 2006. 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 2006.

Exceptions to time lived with you.   A child is considered to have lived with you for all of 2006 if the child was born or died in 2006 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 detention in a juvenile facility, count as time lived at home.

  There are also exceptions 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.

  1. 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.

  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 45 or line 50 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 53, 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 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.

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

  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 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.

  3. 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 41.

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 53, 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.

Filled-in Questions for Amy Brown

Filled-in Questions for Amy Brown

Filled-in Questions for Amy Brown (Page references are to the Form 1040 instructions. Summary: These are the questions for the taxpayer to use to determine if she should use Pub. 972 to determine the child tax credit she can claim. They are answered per the example in the text.

  • “1. Are you excluding income from Puerto Rico or are you filing any of the following forms? No. Continue” checkbox checked

  • “2. Is the amount on Form 1040, line 38, more than the amount shown below for your filing status? No. Continue” checkbox checked

  • “3. Are you claiming any of the following credits? No. Use the worksheet on page 43 to figure your child tax credit.” checkbox checked

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

Filled-in Child Tax Credit Worksheet--Amy Brown (Page references are to the Form 1040 instructions.). Summary: This is an example of the Child Tax Credit Worksheet with line items completed per the information in the text.

1. Number of qualifying child: field contains 2 multiplied by $1,000. Enter the result field contains 2,000
2. Enter the amount from Form 1040, line 46. field contains 1,334
Under 3. Add the amounts from Form 1040:
Line 48: + field contains 225
Enter the total. field contains 225
4. Are the amounts on lines 2 and 3 the same? No. Subtract line 3 from line 2 checkbox checked and field contains 1,109
5. Is the amount on line 1 more than the amount on line 4? Yes. Enter the amount from line 4. Also, you may be able to take the additional child tax credit. See the TIP below. checkbox checked.
This is your child tax credit. Enter this amount on Form 1040, line 53. Field contains 1,109

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

Filled-in Form 8812

Form 8812 Additional Child Tax Credit 2006. Summary: This is an example of Form 8812 completed per the information in the text with these line items completed:

Name(s) shown on return field contains Amy Brown
Your social security number field contains 012-00-5678
Under Part I: All Filers:
1. Enter the amount from line 1 of your Child Tax Credit Worksheet on page 43 of the Form 1040 instructions or page 38 of the Form 1040A instructions. If you used Pub. 972, enter the amount from line 8 of the worksheet on page 4 of the publication field contains 2,000
2. Enter the amount from Form 1040, line 53, or Form 1040A, line 33 field contains 1,109
3. Subtract line 2 from line 1. If zero, stop; you cannot take this credit field contains 891
4. Enter your total taxable earned income. See the instructions on back field contains 30,350
5. Is the amount on line 4 more than $11,300? Yes. Subtract $11,300 from the amount on line 4. Enter the result checkbox is checked and field contains 19,050
6. Multiply the amount on line 5 by 15% (.15) and enter the result field contains 2,858
Next. Do you have three or more qualifying children? No. If line 6 is zero, stop; you cannot take this credit. Otherwise, skip Part II and enter the smaller of line 3 or line 6 on line 13 checkbox is checked
Under Part III Your Additional Child Tax Credit:
13. This is your additional child tax credit. Enter this amount on Form 1040, line 68, or Form 1040A, line 41. field contains 891

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