Tax Guide

Get answers to all your questions about taxes, personal finance, insurance and more.

Child Tax Credits

Among all the new and exciting challenges with a new child, you may not have considered how your child will affect your taxes. No worries, it's nothing but good news.

First, you do not have to prorate tax breaks based on when your child was born. Even if born on the last day of the year, the IRS counts your child as having lived with you all year. So you get the full value of the tax breaks available to parents.

The Personal Exemption

Let’s start with the most basic tax break, the personal exemption. That’s a flat amount subtracted from your taxable income. For 2016, that’s $4,050. You get one exemption for each taxpayer (parent) and dependent on the return. (The exemption does phase out at higher incomes.)

Child Tax Credit

Next up is the Child Tax Credit (CTC), which gives you up to $1,000 for each eligible child dependent. The credit is refundable, meaning you can get a refund from it even if you have no tax liability for the year.

There are income limitations on who can get the credit. If you’re single, you can claim the credit if your AGI is less than $75,000. If you’re married filing jointly, that figure goes up to $110,000, and if you’re filing separately, it’s $55,000. In addition to the requirements for a qualifying child, the child must meet these requirements:

  • The child has to be under age 17 at the end of the year. If he or she turns 17 on the last day of the year, sorry, that child is ineligible.
  • You must claim the child as a dependent on your return.
  • The child can’t have provided over half of their own support for the year. 

Additional Child Tax Credit

The Additional Child Tax Credit (ACTC) is one poorly named tax break. The name doesn’t mean it’s a credit for an additional child; it’s an additional credit for a child. This credit is for parents whose AGI is too high to claim the full Child Tax Credit. And like the Child Tax Credit, the Additional Child Tax Credit is refundable.

When you file your taxes with 1040.com, dependent-related tax breaks like the CTC and ACTC are figured for you automatically. Just fill out the Dependent screen for each child, and we’ll take care of the rest.

See also:
Child and Dependent Care
Claiming a Child When You’re Divorced or Separated