DEFINITION of IRS Publication 972: Child Tax Credit

IRS Publication 972 is a document published by the Internal Revenue Service (IRS) that provides guidance on determining the child tax credit that can be claimed and how to calculate the amount of earned income to report when applying for the Additional Child Tax Credit. IRS Publication 972 provides more specialized information pertaining to the child tax credits found in Form 1040 and Schedule 8812.


Tax Deductions Vs. Tax Credits

BREAKING DOWN IRS Publication 972: Child Tax Credit

IRS Publication 972 has a worksheet that helps determine if a child is eligible, and how much credit a taxpayer can take. Taxpayers must have a qualifying child in order to be eligible for the child tax credit. The maximum amount that can be claimed for a qualifying child is $1,000, and must be claimed using Form 1040. According to IRS Publication 972, a qualifying child or dependent must:

  • be under the age of 17 by the end of the tax year;
  • be claimed as a dependent on the taxpayer's federal tax return;
  • be a U.S. citizen, resident alien, or national - more information on residency requirements can be found in IRS Publication 519;
  • have lived with the taxpayer for more than half of the tax year; and
  • not have provided more than half of his or her own financial support.

IRS Publication 972 provides a child tax credit worksheet that can be used to determine the amount of child tax credit that can be claimed. For instance, the Publication stipulates that a taxpayer must reduce the maximum credit amount of $1,000 for each child if the amount on Form 1040, line 47; Form 1040A, line 30; or Form 1040NR, line 45, is less than the credit. If this amount is zero, you cannot take this credit because there is no tax to reduce. In effect, the child tax credit is non-refundable, which means that the credit can reduce a taxpayer’s bill to zero, and any excess from the credit will not be refunded. An individual who only owes $800 to the government but claims $2,000 child tax credit for her two kids will eventually have to pay nothing; however, the surplus $1,200 will be lost. Individuals that have reduced their tax liabilities to zero but have some credit left over may be able to take the Additional Child Tax Credit (ACTC).

The ACTC is the refundable portion of the child tax credit. Families may qualify for the ACTC if they already qualify for the non-refundable child tax credit. The ACTC is ideal for families who owe less than the Child Tax Credit and would rather receive a refund for the surplus credit. The Internal Revenue Service (IRS) allows families with annual income of more than $3,000 and with three or more qualified children to claim a refund using the Additional Child Tax Credit. The tax credit depends on how much the tax payer earns and is calculated by taking 15% of the taxpayer's taxable earned income over $3,000 up to the maximum amount of the credit, which is $1,000 per child. The total amount in excess of $3,000 (subject to annual adjustments for inflation) is refundable.

IRS Publication also has a worksheet to help figure out earned income, which includes taxable earned income and non-taxable combat pay. Guidelines for calculating the earned income credit (EIC) are include on Line 11 Worksheet. To qualify for EIC, a taxpayer’s earned income and adjusted gross income (AGI) must be less than certain income limits. For the 2017 tax year, for example, a single filer with no dependents earning less than $15,010 is eligible for up to $510 in earned income credit. On the other hand, a taxpayer with two children who is filing jointly with a spouse can claim up to a maximum of $5,616 in EIC if the total of the couple’s earned income in 2017 falls below $50,597. A spouse who is filing separately would not qualify for earned income credit.

For more about this Publication, please refer to Publication 972 – Child Tax Credit on the IRS website.