J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

25.2 Child Tax Credit for Children Under Age 17

For 2012, you may be able to claim a tax credit of $1,000 for each qualifying child who is under age 17 at the end of 2012. To figure the exact amount of your credit, however, you must complete the “Child Tax Credit Worksheet” in the IRS instructions to Form 1040 or 1040A. On the IRS worksheet, you determine if the potential credit ($1,000 × number of qualifying children) is limited by the phaseout rule and if it is, whether the reduced credit is limited by your tax liability (regular tax plus AMT minus specified credits).

The potential credit is phased out by 5% of your adjusted gross income in excess of the phaseout threshold, shown below. If the credit, after application of the phaseout rule, is more than your tax liability (25.3), your credit is limited to the liability. However, even if the credit does exceed your tax liability, part or all of the credit may be refundable as an additional credit if your earned income for 2012 exceeds $3,000 or you have three or more children (25.3).

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Law Alert

Child Tax Credit After 2012

Without new legislation, the child tax credit would drop to $500 per qualifying child in 2013. The refundable part of the credit would also be restricted. Congress is expected to extend the more favorable 2012 credit rules to 2013, but had not yet done so when this book went to press;