Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 29

Child Tax Credit

A taxpayer who has a qualifying child under age 17 may be eligible for a tax credit of up to $1,000 in 2012. Eligibility for the credit does not depend on the taxpayer's making any payments, as does the child and dependent care credit (Chapter 28). The child tax credit applies to each qualifying child of the taxpayer, and there is no limit on the number of children for whom the credit can be claimed.

However, the credit is subject to an income threshold that may limit high-income taxpayers to a partial credit or to no credit at all.

The child tax credit is not refundable, meaning that it is limited to the taxpayer's tax liability. However, certain taxpayers may qualify for the additional child tax credit, which is a refundable tax credit.

The child tax credit should not be confused with the child and dependent care credit (explained in Chapter 28). Depending on the circumstances, a taxpayer may be able to claim both the child tax credit and the child and dependent care credit.

Qualifying Child

The credit can be claimed only for a qualifying child, which is the same definition as a qualifying child under the dependency rules (see Chapter 3). However, a child who is a resident of Canada or Mexico and is otherwise a qualifying child for the dependency exemption does not qualify as a dependent for the child tax credit. A qualifying child for the dependent care credit must satisfy these requirements:

• Relationship. The child must be the taxpayer's child, ...