Form 8812 Additional Child Tax Credit (Refundable)

For most tax payers, the child tax credit is not refundable. That means if you only owe $1,000 in taxes but have two qualifying children to claim – making the tax credit worth $2,000 – your liability will be reduced to zero and that’s that. The rest of the credit just goes away.

There is a special circumstance where the credit can be refundable, meaning the excess is returned to you as a refund. This is known as the Additional Child Tax Credit.

Calculating this additional bonus can become complicated, which is why it’s recommended you use professional tax software which can assist you. With one or more qualifying children, along with $3,000 or more of earned income, you may qualify to claim a refundable credit worth up to 15% of your earned income that exceeds $3,000. Earned income is any wages or compensation resulting from employment or services provided, including combat pay that is non-taxed.

If your earned income is less than $3,000 and you have three or more qualifying children, you may receive a credit if you paid more in Social Security taxes than you earned in income.