Additional Child Tax Credit

An individual taxpayer filing a Federal Income Tax return can claim both an annual exemption for a dependent child (a $3,950.00 reduction in taxable income in 2014) and a child tax credit of $1,000.00 for each child. The child must live with the taxpayer, be under 17 years of age, and must be a citizen or resident of the United States.

The child tax credit is not generally refundable, which means the taxpayer will only receive the benefit, if he owes enough income tax to offset the credit. As a bankruptcy lawyer I often see cases where people raising children do not have enough income to generate taxes in the amount of the credit and thus cannot take advantage of the credit.

However, there is an exception that can sometimes allow low income taxpayers to still receive the credit. The credit will be refundable to the extent of the greater of (1) 15% of the taxable earned income for the years 2013 or 2014; (2) in the case of taxpayers with three or more children the excess of his social security taxes for the year over his earned income credit.