A taxpayer may claim a child tax credit for a qualifying child under the age of 17 who is a dependent on his or her tax return. Taxpayers may also claim a partial child tax credit for dependents who are over the age of 16 and dependents who do not have the required social security number.
The child tax credit (CTC) for each child for 2020 tax year is $2,000. For tax years before 2018 and after 2025, the credit is $1,000 for each qualifying child. The new credit called Other Dependent Credit (ODC) in the amount of $500 is allowed for each qualifying child and relative not qualified for the child tax credit. To qualify for the child tax credit and the other dependent credit, the dependent must be a national, a US citizen, or a resident alien.
The child tax credit is reduced or phased out if the taxpayer’s modified adjusted gross income (MAGI) exceeds a certain amount based on taxpayers filing status, $400,000 for married filing jointly and $200,000 for all other filers. Some taxpayers are allowed the Refundable Additional Child Tax Credit, also referred to ACTC. The maximum amount of the child tax credit per qualifying child that could be refunded even when the taxpayer owes no tax is $1,400.
Taxpayers who fraudulently or recklessly claim the child tax credit and other dependent credit are temporarily prohibited from claiming the credit in future years and may only claim it in future years by completing and submitting Form 8862. A paid tax return preparer is subject to penalty for failing to comply with due diligence requirements.
For further reading:
- see Internal Revenue Code (sec. 24, 152, 6402); Rev. Proc. 2018-57.