Additional Child Tax Credit

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A "refundable" tax credit that allows eligible families to receive up to $1,500 of the $2,000 Child Tax Credit (CTC) per child as a refund for 2022.

The Additional Child Tax Credit (ACTC) is a "refundable" tax credit that allows eligible families to receive up to $1,500 of the $2,000 Child Tax Credit (CTC) per child as a refund for 2022. This implies that if your CTC is higher than your tax liability, you can receive the balance as a check or direct transfer.

The ACTC was established to assist families who qualified for the CTC but were unable to claim the full amount because they owed less in taxes than the credit allowed. The CTC is a "non-refundable" tax credit that lowers your tax obligation by up to $2,000 for each eligible kid who is under the age of 17.

How to Qualify for the Additional Child Tax Credit?

To qualify for the ACTC, you must meet the same requirements as the CTC. These include:
  • The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece, or nephew.
  • You must claim the child as a dependent on your tax return.
  • The child must not provide more than half of their own support.
  • The child must live with you for more than half of the year.
  • The child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  • The child must not file a joint return with anyone else unless the only reason they file is to claim a refund of taxes withheld or estimated taxes paid.

You must also have an "earned income" of at least $2,500 in order to qualify for the ACTC in addition to these requirements. Earned income consists of taxable employee benefits such as wages, salaries, tips, self-employment income, and other forms of pay. It excludes alimony, social security benefits, interest, dividends, and other unearned income.

How to Claim the Additional Child Tax Credit?

You must complete Schedule 8812 and include it with your Form 1040 or 1040-SR in order to claim the ACTC. You can use Schedule 8812 to determine how much ACTC you are eligible to claim depending on your CTC amount and your earned income.

To find out if you are qualified for the CTC and the ACTC, you can also utilize the Child Tax Credit Worksheet in the instructions for Form 1040 or 1040-SR. If you are eligible for both credits, you should fill out lines 19a and 19b of Form 1040 or 1040-SR with the CTC amount and the ACTC amount, respectively.

The ACTC will be included in your tax refund if you qualify for it. Either a cheque or a direct deposit into your bank account are options for how you want to get it. Use Form 8888 to purchase up to $5,000 worth of U.S. savings bonds or to distribute your refund across up to three accounts.

What are the Benefits of the Additional Child Tax Credit?

Families with children who earn low or moderate salaries might receive significant financial relief through the ACTC. They can increase their cash flow and use the money for different costs like food, housing, education, health care, or savings by receiving a refundable credit.

The ACTC can also aid in lowering child poverty and enhancing kids' well-being. Research by the Center on Poverty and Social Policy at Columbia University found that increasing the CTC and making it completely refundable may help 4.1 million children escape poverty and cut the child poverty rate by 40%.

The ACTC is one of a number of tax credits that can help families with children. The Child and Dependent Care Credit (CDCC), the Earned Income Tax Credit (EITC), and the Adoption Credit are additional tax deductions. If you meet the prerequisites for each, you may also be eligible for these credits in addition to the CTC and the ACTC.