This is Valerie Chambers and I'm going to talk about the 2017 tax cut, some job back changes to the child tax credit. I'm also going to contrast it to the dependent care credit. So, child tax credits generally are partially refundable credits. Let's talk about the term "refundable credit" versus "non-refundable credit" with an example. A taxpayer who has no withholdings and who has made no estimated tax payments has a tax liability of $350 before tax credits of $150. How much is paid to or by the taxpayer this year? How much does the taxpayer owe or get refunded? Take a moment and come back. Okay, that was kind of a trick question because we need to know if the credit is refundable or not. If the credit is non-refundable, $350 of the $450 credit will be used to offset the tax liability in full, but nothing will be refunded. On the other hand, if it's a refundable credit, then the taxpayer will actually get a $100 refund from that tax credit because of that tax credit. So, there are refundable credits and non-refundable credits. Child tax credit happens to be partially refundable. Let's take a look at the law prior to 2018. The taxpayer could claim a child tax credit of up to $1,000 for a qualifying child, which is a child that they claimed as their dependent who was under the age of 17, if they had a valid taxpayer identification number. The credit is phased out for high-income taxpayers, defined as somebody who made more than $110,000 filing jointly. That's where the phase-out began, and $110,000 was not indexed to inflation. It had been around since about 1996. The credit was partially refundable, that is 50% of the earned income in excess of $3,000 could be refundable...
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Child tax credit 2024 Form: What You Should Know
Instructions for Schedule 86 — IRS.
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