A close up of a calculator being used to calculate child tax credit.

Tips on How to Calculate Your Child Tax Credit

When April rolls around, it’s time to figure out whether you and your family qualify for the federal child tax credit. Taxpayers that are eligible to claim a child or dependent on their tax return may also be eligible to receive a credit of up to 1,000 per child. The child tax credit is one of many benefits designed to strengthen families and communities.

Child Tax Credit

This credit only pertains to dependent children that are under the age of 17 at the end of the calendar year. The child tax credit can be used to reduce the amount of federal taxes payable to the Internal Revenue Service. Once a bill has been reduced to zero, the amount of any excess tax credit may result in a refund.

The exact amount of the credit can be reduced depending on how much income was earned during the calendar year. As is the case with most IRS provisions, the child tax credit is subject to an extensive list of eligibility requirements and special criteria. Although there’s no limit to the number of dependent children that can be claimed under this particular statute, it should be noted that an excessive number of credits may expose you to additional state taxes. In some cases, the federal Alternative Minimum Tax may also offset any savings or refund.

How to Qualify

For tax purposes, a dependent must be related to the taxpayer, including son, daughter, stepchild, foster child, sibling, grandchild or other eligible relative. The dependent must also be under the age of 17 in addition to having lived with the taxpayer for more than half of the calendar year. The child is not eligible unless the parent or guardian has provided more than 50% of financial support during the filing period. Finally, the child must be younger than the filer, be a citizen or resident alien of the United States, and must not have filed a joint tax return with a spouse. Once again, there are additional criteria that may apply depending on the given circumstances.

As with most tax credits, there are prescribed income limitations that affect the available amount. For example, married couples filing separate returns will notice a reduction in the amount of their tax credit if their income exceeded $55,000. The limit is $75,000 for a single head of household and $120,000 for married couples filing a joint tax return. Your credit will be reduced by $50 for every $1,000 of income above these limits. The prescribed income limits have been established by law and are not indexed to account for inflation.

Get Your Refund

As indicated previously, the official IRS criteria for determining the refundable portion of a child tax credit can be somewhat complicated. If you claim one or two children, the refundable amount will be limited to the amount of the excess child credit or 15% of any income over $3,000, whichever is smaller. Additional calculations will be necessary for taxpayers with three or more dependents. Either way, it usually pays to pay close attention to what’s going on with the federal child tax credit.

Last Updated: September 11, 2014