J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

25.3 Figuring the Child Tax Credit

You use the Child Tax Credit Worksheet in the IRS instruction booklet or in Publication 972 to figure the credit. You do not attach the worksheet to your return.

Phaseout formula.

If your income exceeds the phaseout threshold shown in 25.2, the maximum credit for 2012 of $1,000 per qualifying child is reduced by $50 for each $1,000 (or fraction of $1,000) that your AGI exceeds the phaseout threshold (25.2) for your filing status. The computation is made on the worksheet in the IRS instructions. See Example 2 below.

Liability limitation.

The IRS worksheet limits the child tax credit to your tax liability (regular tax plus alternative minimum tax, if any). If you are subject to the phaseout rule, the amount of the credit allowed after the phaseout computation is subject to the liability limitation. Tax liability is reduced on the worksheet by certain other credits that you claim. If your credit exceeds your liability, the credit is limited to the liability but you can probably claim the “additional child tax credit”, which is refundable; see below.

Refundable portion of credit claimed as additional child tax credit.

If the full amount of the credit cannot be claimed on the Child Tax Credit Worksheet because of the tax liability limitation, you may be able to obtain a refund for the balance in the form of the additional child tax credit. The credit for 2012 is refundable to the extent of 15% of your taxable earned income plus tax-free combat pay ...