In addition to the nonrefundable Child Tax Credit (CTC) and Credit for Other Dependents (ODC), a taxpayer with one or more qualifying children may be able to claim the refundable Additional Child Tax Credit (ACTC).
The taxpayer is eligible for the refundable ACTC if some portion of the CTC was disallowed because the taxpayer's tax liability was reduced to zero before the entire CTC was used.
If the CTC was phased out due to the AGI limitation ($400,000 for MFJ and $200,000 for all other filing statuses), no additional credit will be allowed.
The ACTC is calculated on Schedule 8812 and is reported in the tax credits section of Form 1040.
Schedule 8812 is automatically generated in TaxSlayer Pro as needed depending on the dependent information, the answers to due diligence questions about the dependents, the amount of earned income, and the tax liability on the return.
ACTC Calculation
The ACTC is calculated as follows:
Taxpayers with one or two children - The lesser of:
- The disallowed portion of the child tax credit, or
- 15% of the taxpayer's earned income in the excess of $2,500
Taxpayers with three or more children - The lesser of:
- The disallowed portion of the child tax credit, or
- The larger of:
- 15% of the taxpayer's earned income in the excess of $2,500
- FICA and Medicare tax paid minus earned income credit.
While the calculation on Schedule 8812 is handled automatically based on the information in the return, there are several unusual situations in which the calculation may need to be modified. To modify the calculation on Schedule 8812 in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Credits
-
2021 and fwd: Nonrefundable Child Tax Credit and Credit for Other Dependents
2020 and prior: Child Tax Credit - Amount to (+/-) to Taxable Earned Income for Schedule 8812 - If needed, select this line to adjust the earned income amount on Schedule 8812 Line 6a.
- Railroad Employee Representative Amount - If needed, select this line to enter an amount that will plug into Line 12 of the Line 9 Worksheet for Schedule 8812.
- Include Medicaid Waiver Payments in Earned Income? - If the return includes Medicaid waiver payments and the taxpayer would like them included in earned income for the purpose of calculating the credit, select this line and answer Yes to the confirmation question.
Note: This is a guide on how the Additional Child Tax Credit is calculated in the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
IRS: Instructions for Schedule 8812, Child Tax Credit
IRS: Publication 972, Child Tax Credit (for 2020, last year it was published)