Child Tax Credit & Additional Child Tax Credit (2024)

The Child Tax Credit (CTC) is one of the most significant family tax benefits in the U.S. tax code. For the 2024 tax year (which applies to EA exams in the May 2025 - February 2026 testing window), understanding the CTC requirements, calculations, and limitations is critical for exam success.

Overview of Child Tax Credit for 2024

Key Point: The $2,000 CTC is not fully refundable. The nonrefundable portion ($300 per child) can only reduce your tax liability to zero. The remaining $1,700 can be received as a refund through the ACTC.

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Qualifying Child Requirements (The 6 Tests)

To claim the $2,000 Child Tax Credit, a child must meet ALL six requirements:

Critical Exam Tip: The SSN requirement is heavily tested. A child with an Individual Taxpayer Identification Number (ITIN) does NOT qualify for the $2,000 CTC. However, the taxpayer may claim the $500 Credit for Other Dependents (ODC) for that child instead.

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Phase-Out Rules

The Child Tax Credit begins to phase out at higher income levels:

Phase-Out Formula: Credit Reduction = [(MAGI - Threshold) / $1,000] x $50 (round UP any fraction to next whole $1,000)

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Phase-Out Calculation Example

Scenario: Tom and Lisa are married filing jointly with 2 qualifying children. Their MAGI is $425,000.

Step-by-Step Calculation:

1. Base Credit: 2 children x $2,000 = $4,000
2. Excess Over Threshold: $425,000 - $400,000 = $25,000
3. Number of $1,000 Increments: $25,000 / $1,000 = 25
4. Credit Reduction: 25 x $50 = $1,250
5. Final Credit: $4,000 - $1,250 = $2,750

Note: If MAGI were $425,500, you would round UP to 26 increments ($1,300 reduction).

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Additional Child Tax Credit (ACTC) - The Refundable Portion

The ACTC allows taxpayers with lower tax liabilities to receive a refund for the unused portion of their CTC.

ACTC Calculation for 2024:

• Maximum refundable amount: $1,700 per qualifying child
• Earned income threshold: Must have earned income over $2,500
• Calculation: 15% of earned income exceeding $2,500

ACTC Formula: Refundable ACTC = Lesser of: (1) Unused CTC after reducing tax to zero, OR (2) 15% x (Earned Income - $2,500)

ACTC Example:

Scenario: Maria is a single mom with 2 qualifying children. She has $18,000 in wages and her tax liability (before credits) is $500.

1. Maximum CTC: 2 x $2,000 = $4,000
2. Nonrefundable Portion Used: $500 (reduces tax to zero)
3. Unused CTC: $4,000 - $500 = $3,500
4. Maximum ACTC: 2 x $1,700 = $3,400
5. Earned Income Calculation: 15% x ($18,000 - $2,500) = 15% x $15,500 = $2,325
6. ACTC Received: Lesser of $3,400 or $2,325 = $2,325 refund

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Credit for Other Dependents (ODC)

The $500 Credit for Other Dependents is a nonrefundable credit available for dependents who do NOT qualify for the CTC.

Who Qualifies for ODC ($500):

• Children age 17 or older
• Children with ITINs (instead of SSNs)
• Dependent parents
• Other qualifying relatives
• College students age 19-23 (if not qualifying children for EITC)

Key Difference from CTC: The ODC is completely nonrefundable - it can only reduce tax liability to zero and cannot generate a refund.

Same Phase-Out Thresholds: ODC uses the same $200,000/$400,000 thresholds as CTC.

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SSN vs. ITIN: Critical Distinction

This is a HIGH-FREQUENCY exam topic:

Exam Tip: A child with an ITIN can ONLY qualify for the $500 ODC, not the $2,000 CTC or ACTC. The SSN must be valid for employment and issued before the due date of the return (including extensions).

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Schedule 8812: Credits for Qualifying Children and Other Dependents

All CTC, ACTC, and ODC calculations are completed on Schedule 8812 (Form 1040).

Schedule 8812 Structure:

Where It Goes on Form 1040:

• Nonrefundable CTC/ODC: Line 19 (from Schedule 8812, Line 14)
• Refundable ACTC: Line 28 (from Schedule 8812, Part II-C)

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Historical Context: CTC Evolution

Understanding the history helps with exam context:

2021 American Rescue Plan (ARPA) Expansion - Know this for context:

• Increased credit to $3,600 (under 6) and $3,000 (ages 6-17)
• Made credit fully refundable
• Raised age limit to under 18
• Provided advance monthly payments
• This was temporary - 2024 returns use pre-ARPA rules

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TCJA Sunset Warning

The Tax Cuts and Jobs Act (TCJA) provisions, including the $2,000 CTC and $500 ODC, are scheduled to expire after December 31, 2025. Without Congressional action:

• CTC would revert to $1,000 per child
• Phase-out thresholds would return to $75,000/$110,000
• ODC would be eliminated

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EA Exam Tips - Child Tax Credit

1. Age 17 is the cutoff - A child who turns 17 during the year does NOT qualify for CTC (but may qualify for ODC)

2. SSN is mandatory for CTC - No SSN = No $2,000 credit (only $500 ODC with ITIN)

3. Memorize the phase-out thresholds: $200,000 (all statuses except MFJ) and $400,000 (MFJ only)

4. $50 reduction per $1,000 - Round UP partial thousands

5. ACTC formula: 15% x (Earned Income - $2,500), maximum $1,700 per child

6. Residency is 6+ months - More than half the year, not "at least half"

7. ODC is nonrefundable - Cannot generate a refund like ACTC can

8. 3+ children exception: Taxpayers with 3 or more qualifying children may use an alternative ACTC calculation using Social Security taxes paid (Part II-B of Schedule 8812)