Additional Child Tax Credit

AAA

DEFINITION of 'Additional Child Tax Credit'

A refundable credit that can be claimed by taxpayers who are ineligible to claim the full non-refundable child tax credit, because it exceeds their total tax liability. The additional child tax credit was created to reimburse taxpayers for the non-refundable portion of their child tax credit.

The additional child tax credit is available to families with three or more qualified children.

INVESTOPEDIA EXPLAINS 'Additional Child Tax Credit'

The additional child tax credit is calculated by adding 15% of the taxpayer's taxable earned income to any tax-free combat pay. The total amount that is in excess of $11,750 (subject to annual adjustments for inflation) is refundable.

Even taxpayers with income below this threshold are eligible if they have at least three qualifying dependents and have paid Social Security tax in excess of the amount of their earned-income credit for the year. This credit is claimed on form 8812 and is also subject to the same phaseout limitations as the child tax credit.

VIDEO

RELATED TERMS
  1. Additional Personal Allowance

    In the United Kingdom, an extra deduction as set forth by HM ...
  2. IRS Publication 972: Child Tax ...

    A document published by the Internal Revenue Service (IRS) that ...
  3. Provincial Parental Insurance Plan ...

    A Canadian tax deduction relating to taxes that are paid or payable ...
  4. Earned Income

    Income derived from active participation in a trade or business, ...
  5. Earned Income Credit - EIC

    A tax credit in the United States which benefits certain taxpayers ...
  6. 1040 Form

    The standard Internal Revenue Service (IRS) form that individuals ...
RELATED FAQS
  1. How can I use a child tax credit?

    You may be able to reduce the amount of taxes you owe by up to $4,000, by claiming the child tax credit of up to $1,000 for ...
Related Articles
  1. Retirement

    Raising Grandchildren A Financial Feat

    Becoming a full-time caregiver again presents many challenges - including making ends meet.
  2. Taxes

    Taxing Times For Divorced Parents

    Find out how to deal with the tax issues that arise for divorced parents with dependent children.
  3. Taxes

    5 Tax Credits You Shouldn't Miss

    If you're not taking advantage of these deductions, you could be missing out on tax savings.
  4. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  5. Options & Futures

    Budgeting For A New Baby

    This little member of your family will be a big expense. Find out what you need to budget for and how to save.
  6. Savings

    5 Ways To Save On Child Care Costs

    Child care costs can be a shock to new and expecting parents, but are some programs in place to help with the first few years.
  7. Taxes

    Which Is Better? Tax Preparer Or Tax Software

    Every taxpayer โ€“ and every year โ€“ is different, so here are four factors to help you decide whether a tax pro or software is best for you.
  8. Taxes

    Getting U.S. Tax Deductions On Foreign Real Estate

    If your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.
  9. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  10. Retirement

    Tapping Retirement Funds Early โ€“ Without A Penalty

    The IRS offers several ways to skirt the 10% penalty on early retirement distributions.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center