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Can I request the ACTC if I do not qualify for the IRS Child Tax Credit (CTC)?

We resolve one of the big questions about tax credits: can I apply for the Additional Child Tax Credit if I do not qualify for the IRS CTC?

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The Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC) are two valuable tax credits designed to help families with the costs of raising children. While the CTC is a non-refundable credit, the ACTC is a refundable credit that can provide a significant tax refund to eligible families. However, many taxpayers are unsure if they can claim the ACTC even if they don’t qualify for the CTC. In this article, we will explore the answer to this question and provide guidance on how to request the ACTC.

Understanding the Child Tax Credit (CTC)

The CTC is a non-refundable tax credit worth up to $2,000 per qualifying child. To qualify for the CTC, your child must meet certain requirements, such as being under the age of 17, being claimed as a dependent on your tax return, and having a valid Social Security number. Additionally, your income must be below the phase-out limits, which are $400,000 for married couples filing jointly and $200,000 for all other filers.

Understanding the Additional Child Tax Credit (ACTC)

The ACTC is a refundable tax credit that allows you to claim a refund even if you don’t owe taxes. The ACTC is equal to 15% of your earned income above $2,500, up to the maximum credit amount of $1,600 per child. To qualify for the ACTC, you must have at least $2,500 in earned income and meet the same eligibility requirements as the CTC.

How the Additional Child Tax Credit works

The ACTC applies when the Child Tax Credit lowers your owed tax to $0, but there’s money left over from the credit. For example, say you owe $900 in taxes before the credit applies. The Child Tax Credit lowers your taxes to $0, but that leaves $1,100 of the credit unused. This is where the ACTC kicks in, transforming the leftover amount into a refund. As a result, you could receive as much as $1,100 as a tax refund.

When Child Tax Credit stops or continues

The CTC usually stops on August 31 after your child turns 17, meaning your child must be under 17 to qualify for ACTC at the end of the tax year. However, it can continue for children under 20 who are in approved education, training, or registered with a careers service. It offers approved education which includes full-time courses like A levels, vocational qualifications, and certain traineeships.

What qualifies your Child ACTC

The following conditions must be met if your child is to qualify for either the Child Tax Credit or Additional Child Tax Credit;

  • Be under 17 at the end of the tax year.
  • Meet the relationship and residency tests for uniform definition of a qualifying child.
  • Not provide more than half of his or her own support for the tax year
  • Have lived with you for more than half the tax year (see Instructions for Schedule 8812, Credits for Qualifying Children and Other DependentsPDF, for exceptions for birth or death during the year, temporary absences, kidnapped or missing or children of divorced or separated parents)
  • Be claimed as a dependent on your return
  • Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes)
  • Be U.S. citizen, U.S. National or a U.S. resident alien. 
  • Must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions).
  • Be eligible for CTC

Can I request the ACTC even if I don’t qualify for the CTC?

No, You cannot request for the ACTC if you don’t qualify for CTC as they share the same requirements.  In fact, one of the requirements for qualifying for ACTC is to be eligible for CTC.

How to request the ACTC

To request the ACTC, you must file Form 8812, Additional Child Tax Credit, with your tax return. You will need to provide your child’s Social Security number, date of birth, and relationship to you. You will also need to provide proof of your earned income, such as a W-2 or self-employment income statement.

Child Tax Credit vs. Additional Child Tax Credit

The Child Tax Credit can lower your total tax bill by $2,000 per qualifying child. However, this credit isn’t refundable, so the money doesn’t apply after you owe $0 in taxes. On the other hand, the ACTC provides a tax refund of up to $1,600 per qualifying child. The two credits are connected because the ACTC only kicks in if the filer doesn’t owe taxes. In addition, the Child Tax Credit reduces the ACTC by the amount it took to lower the filer’s taxes to $0.

In summary, The ACTC is a financial benefit for families filing their taxes because it goes beyond the Child Tax Credit’s reach. While the Child Tax Credit reduces the filer’s tax liability per qualifying child, it falls short of offering a refund if it brings the owed taxes to zero. Fortunately, the ACTC ensures that a significant portion—up to $1,600 per child—transforms into a refund, potentially putting thousands of dollars back into the hands of eligible taxpayers.

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