additional child tax credit

[Chief]

iS THE MAXIMUM additional child tax credit this year 3,000 dollars for 3 childfren?

[Koss]

Additional Child Tax Credit

In theory, there is no maximum. In practice, you're not going to see many cases where the credit exceeds $3,000.

The calculations for the Additional Child Tax Credit are a bit mind-boggling. Of course, it begins with the basic Child Tax Credit; the additional credit can never be more than the "unused," or non-refundable portion of the Child Tax Credit.

Then there are some very complicated limitations and thresholds that kick in at various levels. You don't get the additional credit, or it gets reduced, if you make too much money; it also gets reduced if you don't make enough money. And then there is some interaction with the Earned Income Credit. The EIC and the Additional Child Tax Credit, when combined, cannot be more than the amount the taxpayer paid in social security tax. Or something like that. Like I said, it's mind-boggling.

If the income is low enough, the amount of the additional credit will either be limited because they didn't make enough money to qualify for it, or it will be limited because they are getting too much EIC. If the income is high enough, then it gets phased out, because... well, because tax credits are not meant for wealthy people.

So it takes a very unusual combination of variables to see an additional child tax credit of more than $3,000. But it is possible. The income has to be in the right range. Low enough that the tax liability is less than the basic child tax credit, so that something is left over. High enough that they still qualify for the additional credit. And then you have pull EIC out of the equation, to eliminate that particular limitation.

I have too much time on my hands.

Give a single guy wages of $41,000. Give him five kids who qualify for the child tax credit--but not for EIC. The kids live with his ex. Form 8332. Taxpayer is the noncustodial parent. Then give him the maximum American Opportunity Credit for himself, i.e., he paid more than $4000 in qualifying tuition.

Here's the return:

Adjusted Gross Income 41000
Std Deduction (5950)
Exemptions (22800)
Taxable Income 12250
Tax Liability 1406
Educ Credit (1406)
Tax 0

Additional Child Tax Credit = $5,000

And he would even get a $1000 refundable American Opportunity Credit.

BMK

[taxea]

Yet another reason why I sold the prep portion of my practice. The laws are truly becoming mind boggling! And when written in lawyerese it is a wonder that anyone can follow the script. Why can't they be converted to plain english?

[Super Mom]

Yet another reason why I sold the prep portion of my practice. The laws are truly becoming mind boggling! And when written in lawyerese it is a wonder that anyone can follow the script. Why can't they be converted to plain english?

That's why I like the taxbook materials, they put things in plain english!

[Koss]

Three Children?

I looked back at the original post, and now I'm not sure I answered the question. Maybe I'm overthinking this.

If the taxpayer only has three children, then the additional child tax credit cannot possibly be more than $3000. The maximum value is $1000 per qualifying child.

But there is no limit to the number of children.

The maximum of three children applies to EIC.

In some cases, in order to qualify for the additional child tax credit, the taxpayer must have at least three qualifying children. But there is no maximum.

BMK

[taxea]

I looked back at the original post, and now I'm not sure I answered the question. Maybe I'm overthinking this.

If the taxpayer only has three children, then the additional child tax credit cannot possibly be more than $3000. The maximum value is $1000 per qualifying child.

But there is no limit to the number of children.

The maximum of three children applies to EIC.

In some cases, in order to qualify for the additional child tax credit, the taxpayer must have at least three qualifying children. But there is no maximum.

BMK

I thought he was asking whether the max credit had gone up this year. There was earlier talk in tax circles, not here, that Congress may raise it to 1500. per child.

Mom...me too! I sometimes don't know what I would do without it. Although I find the form instructions (legalese) and Pub 17 examples very helpful to clear things up for me.