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The more the merrier: Additional Child Tax Credit (ACTC)

September 7, 2023 By Israel Padilla

Let’s Talk About the Additional Child Tax Credit (ACTC)

If you’re like the 99% of Americans, you’re always looking for ways to save money and get some extra cash to cover your living expenses. Add kids into the mix and this becomes increasingly harder to do. Well, I have some good news for you: There’s a tax credit that can help you do just that. It’s called the Additional Child Tax Credit (ACTC), and it can give you up to $1,500 or $1,600 per child as a refund, even if you don’t owe any taxes. Sounds too good to be true, right? Well, it’s not, but there are some rules and requirements you need to know before you claim it. In this blog post, I’ll explain everything you need to know about the ACTC for 2022 and 2023, including who qualifies, how much you can get, how to claim it, and more. Let’s get started!

Table of Contents

What is the Additional Child Tax Credit?

The Additional Child Tax Credit (ACTC) is a refundable tax credit that allows you to get back some or all of the unused portion of your Child Tax Credit (CTC). The CTC is a nonrefundable tax credit that reduces your tax bill by up to $2,000 for each qualifying child under age 17. However, if your CTC is more than your tax liability, you can’t get the excess amount as a refund. Once the tax bill gets to zero any unused portion of the CTC is lost.  That’s unfair. Let’s see how ACTC comes in. The ACTC lets you receive up to $1,500 or $1,600 of the $2,000 CTC per child as a refund for 2022 and 2023, respectively. This means you get a check for the remaining CTC after your tax bill is reduced to zero.

Who qualifies for the Additional Child Tax Credit?

To qualify for the ACTC, you need to meet three main requirements:

  1. You must have one or more qualifying children who meet the same criteria as for the CTC. These criteria include age, relationship, dependency, support, residency, citizenship, and filing status. You can find more details on these criteria here.
  2. You must have earned income of at least $2,500 for 2022 and 2023. Earned income includes wages, salaries, tips, self-employment income, and certain disability benefits. It does not include unearned income such as interest, dividends, alimony, child support, pensions, or social security benefits.
  3. You must have a valid Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) issued on or before the due date of your tax return (including extensions). If you or your spouse (if filing jointly) do not have an SSN or ITIN by then, you cannot claim the ACTC on either your original or an amended return.
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How much is the Additional Child Tax Credit?

The amount of your ACTC depends on two factors: your CTC amount and your earned income.

Your CTC amount is based on the number of qualifying children you have and your modified adjusted gross income (MAGI). For 2022 and 2023, the CTC is $2,000 per child. However, this amount begins to phase out when your MAGI exceeds $200,000 ($400,000 if married filing jointly). The CTC is reduced by $50 for each $1,000 (or fraction thereof) by which your MAGI exceeds the threshold.

Your earned income is the amount of income you earn from working or running a business. For 2022 and 2023, your ACTC is equal to 15% of your earned income above $2,500, up to the maximum amount of $1,500 or $1,600 per child, respectively. For example, if you have two qualifying children and your earned income is $30,000 in 2022, your ACTC is $4,125 ($30,000 – $2,500 x 15% x 2). However, since the maximum ACTC per child is $1,500, your ACTC is limited to $3,000 ($1,500 x 2).

How to claim the Additional Child Tax Credit?

To claim the ACTC, you need to fill out two forms: Form 1040 and Schedule 8812. Form 1040 is the main tax form that you use to report your income and deductions. Schedule 8812 is a supplementary form that you use to calculate your CTC, ODC (credit for other dependents), and ACTC. You can find both forms and their instructions here.

On Form 1040, you need to enter the number of qualifying children you have on line 19a and the amount of your CTC and ODC on line 19b. To figure out these amounts, you need to use the Child Tax Credit Worksheet in the Form 1040 instructions. On Schedule 8812, you need to enter the names and SSNs or ITINs of your qualifying children on Part I, and the amount of your earned income on Part II. To figure out your ACTC amount, you need to use Part III of Schedule 8812. You then enter the amount of your ACTC on line 19c of Form 1040.

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If you’re not sure how to fill out these forms or if you qualify for the ACTC, don’t worry. You can use a tax software like TurboTax to do it for you. TurboTax will ask you simple questions about your situation and guide you through the process step by step. It will also check for errors and optimize your tax outcome. Plus, it’s free for simple returns!

What if I made a mistake when claiming the ACTC and got denied?

If you’ve claimed the Additional Child Tax Credit (ACTC) in the past, but were denied by the IRS, you may need to file Form 8862 to get it back. Learn how to do this properly.

Tips and tricks to maximize your Additional Child Tax Credit

Now that you know how the ACTC works, here are some tips and tricks to help you get the most out of it:

  • Keep track of your earned income throughout the year. If you’re close to the $2,500 threshold or the maximum ACTC amount per child, you may want to adjust your withholding or make estimated tax payments to avoid a large tax bill or a reduced refund.
  • Claim all the qualifying children you’re entitled to. If you have adopted children, foster children, stepchildren, siblings, or nieces and nephews who meet the criteria for the CTC, don’t forget to include them on your tax return. If they don’t have an SSN or ITIN yet, apply for one as soon as possible.
  • File your tax return as early as possible. The IRS cannot issue refunds before mid-February for returns that properly claim the ACTC. This time frame applies to the entire refund, not just the portion associated with the ACTC. To get your refund faster, file your return electronically and choose direct deposit.

Conclusion

The Additional Child Tax Credit is a great way to get some extra money back from the IRS if you have qualifying children and earned income. For 2022 and 2023, you can get up to $1,500 or $1,600 per child as a refundable credit. To claim it, you need to fill out Form 1040 and Schedule 8812 with accurate information and valid SSNs or ITINs. You can also use a tax software like TurboTax to make it easier and faster.