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1 1 (January 17, 2019)

handle is hein.crs/govydf0001 and id is 1 raw text is: Congressional Research Service Informing the legislative debate since 1914 January 17, 2019 The Child Tax Credit Calculating the Credit When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $2,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family multiplied by $2,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. The refundable portion of the credit is referred to as the additional child tax credit, or ACTC. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $2,500, up to the maximum amount of the refundable portion of the credit. The maximum amount of the refundable portion of the credit is $1,400 per qualifying child. The $2,000-per-child value of the credit falls by a certain amount as a family's income rises. Specifically, for every $1,000 of modified adjusted gross income (MAGI) above a threshold amount, the credit falls by $50-or effectively by 5% of MAGI above the threshold. The threshold amount depends on a taxpayer's filing status, and equals $200,000 for single parents and married taxpayers filing separate returns, and $400,000 for married taxpayers filing joint returns. The actual income level at which the credit is entirely phased out (i.e., equals zero) depends on the number of qualifying children a taxpayer has. Generally, it takes $40,000 of MAGI above the phaseout threshold to completely phase out $2,000 of credit. For example, the credit will completely phase out for a married couple with two children if their MAGI exceeds $480,000. The child tax credit can offset a taxpayer's Alternative Minimum Tax (AMT) liability. Currently, the maximum credit per child, refundability threshold, and phaseout thresholds are not indexed for inflation. From 2018 to 2025, the maximum amount of the ACTC is indexed for inflation. Table 1 provides an overview of key provisions of the child tax credit under current law and how they will change, as scheduled under P.L. 115-97. Table I. Overview of Key Aspects of the Child Tax Credit Under Current Law Credit Parameter Current Law Post 2025 Max Credit $2,000 (Nil) $1,000 (NIl) Per Child Max $1,400 (1l) $1,000 (NIl) Refundable Refundability $2,500 (NIl) $3,000 (NIl) Threshold Refundability 15% 15% Rate Phase-Out $200,000 unmarried $55,000 married Threshold taxpayer separate return $400,000 married joint $75,000 unmarried return (NIl) taxpayer $110,000 married joint return (NIl) Offfsets Yes Yes AMT tax Source: Internal Revenue Code, 26 U.S.C. §24. Notes: NIl = not indexed for inflation. 11 = indexed for inflation. Def nt ion of a Qualifying Child In order to claim the child tax credit, a taxpayer's child must be considered a qualifying child and meet several requirements that may differ from eligibility requirements for other child-related tax benefits: 1. The child must be under 17 years of age during the entire year for which the taxpayer claims the credit. 2. The child must be eligible to be claimed as a dependent on the taxpayer's return. 3. The child must be the taxpayer's son, daughter, grandson, granddaughter, stepson, stepdaughter, niece, nephew, or an eligible foster child of the taxpayer. 4. The child must live at the same principal residence as the taxpayer for more than half the year for which the taxpayer wishes to claim the credit. 5. The child cannot provide more than half of their own support during the tax year. 6. The child must be a U.S. citizen or national. If they are not a U.S. citizen or national, they must be a resident of the United States. The age and citizenship requirements for a qualifying child for the child tax credit differ from the definition of qualifying child used for other tax benefits and can cause https://crsreports.congressge

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