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18340: 8812 - CTC, ACTC, and ODC (Drake23)


1040 Individual

What schedule is used for the Child Tax Credit, the Additional Child Tax Credit, or the Other Dependent Credit (Drake23)?

 

Schedule 8812 and Wks 8812 are used to calculate and report information required for Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), or the Other Dependent Credit (ODC). Each of these credits has different requirements and thresholds and the software will attempt to carry the dependent to the form based on your entries, however, you should ensure that the form and credits are calculated correctly. 

This summary of changes that apply in Drake23 is adapted from the 8812 Instructions

  • The initial amount of the CTC is $2,000 for each qualifying child. It is a non-refundable credit, limited to the tax liability on the return (see the Wks CRED_LMT in view). 
  • The credit amount begins to phase out where modified adjusted gross income exceeds $200,000 ($400,000 in case of a joint return).
  • The maximum ACTC amount for each qualifying child increased to $1,600. Taxpayers may be able to claim the ACTC if less than the full amount of CTC was claimed. 
  • A child must be under age 17 at the end of 2023 to be a qualifying child.
  • Bona fide residents of Puerto Rico may be eligible to claim the ACTC if they have one or more qualifying children.

Additional changes to the CTC are pending legislative approval in Congress under H.R. 7024, Tax Relief for American Families and Workers Act of 2024. If the bill is passed into law, the program will be updated as quickly as possible following guidance from the IRS. ​More information will be added here when available.

On screen 2, overrides are available on the Due Diligence tab as follows:

  • Eligible for Other Dependents Credit only
  • Not Eligible for Child Tax Credit OR Other Dependents Credit 
  • Taxpayer has Form 8332 or a substantially similar statement from custodial parent and qualifies for the Child Tax Credit.
    • For more information about Form 8332, see KB 10558

Important: The checkbox on the Dependent tab SSN is not valid for work. Since a SSN that is valid for work is required for CTC, this selection will disqualify that child for the Child Tax Credit as well. In most circumstances, this should not be marked.

After being calculated on Schedule 8812, the amounts flow to Form 1040 as follows:

  • CTC/ODC to Form 1040, line 19.
  • ACTC to Form 1040, line 28.

Calculations for the CTC, ODC, and ACTC are pulled from other entries on the return including entries made on screen(s):

  • 8812 (reconcile advanced CTC payments and answer for 13B regarding bona fide residence in Puerto Rico, option to not claim ACTC)
  • (age, relationship, months in home, overrides for eligibility, child specific due diligence questions) 
  • 8867 (due diligence questions, answer to question 13A regarding living in the US)

The Schedule 8812 is two pages.

  • Part I calculates the Child Tax Credit and Credit for Other Dependents.
  • Part II-A calculates the additional child tax credit. If the amount on Part I, line 12 is more than the amount on line 14, this part is used to calculate any additional CTC.
  • Part II-B applies to certain filers with three or more qualifying children and Bona Fide Residents of Puerto Rico.
  • Part II-C shows the amount that is carried to Form 1040, line 28. 

Wks 8812 is produced when needed to support various calculations related to Schedule 8812. 

Child Tax Credit
Maximum credit is $2,000 per qualifying child under age 17. This credit is non-refundable.

The credit begins to phase out at these AGI levels:

  • $400,000 MFJ
  • $200,000 MFS/S/HOH/QW

A child is a qualifying child for purposes of the child tax credit only if they meet all seven conditions listed in Publication 972, page 3.

The child must be under age 17 by the end of the year and have an SSN that is valid for employment and issued prior to the due date of the return.

Additional Child Tax Credit

The software automatically calculates the amount of Additional Child Tax Credit (ACTC) and produces Form 8812 on a qualifying return. The ACTC flows from Form 8812 to Form 1040, line 17b.

The ACTC is a credit that may be available to a taxpayer who qualified for the Child Tax Credit (CTC), but who could not get the full amount of the CTC. The ACTC is a refundable credit, which means that it can produce a refund even if there is no tax liability on the return. 

The ACTC cannot exceed $1,500 times the number of qualifying children, less the CTC on the taxpayer's return. Within that limit, the ACTC is generally 15% of the taxpayer's earned income over $2,500.

  • Note: for taxpayers with three or more qualifying children, ACTC is the greater of:
    • 15% of the taxpayer's earned income over $2,500, or 
    • the excess of the taxpayer's Social Security taxes for the year over the taxpayer's earned income credit for the year.

For more information about the ACTC, see the following links: 

Note: While certain religious groups are exempt from getting an SSN, if the children have valid SSNs (and meet the other requirements) they are eligible for the Additional Child Tax Credit and it is calculated per the form instructions. Generally, the Amish (Form 4029) will accept a non-refundable tax credit that will decrease their tax liability, but not result in a refund. If the taxpayer wants to opt-out of the ACTC, there is a checkbox on the 8812 screen that says Do not claim Additional Child Tax Credit

Other Dependent Credit

Dependents who do NOT qualify for the Child Tax Credit could be eligible for a non-refundable credit of up to $500 for each qualifying dependent. The number of other dependents is displayed on Wks 8812, line 2. 

"Other Dependent" facts:

  • The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien.
  • Children age 17 or over, including college students, children with ITINs, or other older relatives in the taxpayer's household could qualify.
  • Additional limitations apply, per Notice 2018-70:
    • "Section 152(a) of the Code generally defines a “dependent” to mean a “qualifying child” or a “qualifying relative.” Section 152(d)(1) defines a qualifying relative to mean an individual
      • (A) who bears a specific relationship to the taxpayer,
      • (B) whose gross income for the calendar year in which the taxpayer’s taxable year begins is less than the exemption amount (as defined in § 151(d)),
      • (C) who receives over one-half of his or her support from the taxpayer for the calendar year in which the taxpayer’s taxable year begins, and
      • (D) who is not a qualifying child of the taxpayer or any other taxpayer for any taxable year beginning in the calendar year in which the taxpayer’s taxable year begins."

The credit begins to phase out at these AGI levels:

  • $400,000 MFJ
  • $200,000 MFS/S/HOH/QW

See Publication 5307 for more information. 

Frequently Asked Questions

  • Why is the software taking the Adoption Credit before the Child Tax Credit?
    • If you are claiming certain other credits, you must complete the Line 13 Worksheet to determine how much CTC or ODC is allowed after the other limitations shown on the Wks 8812. The following credits may reduce the amount of CTC or ODC that is allowed: 
      • Form 8396, Mortgage interest credit.
      • Form 8839, Adoption credit.
      • Form 5695, Part I, Residential energy efficient property credit.
      • Form 8859, District of Columbia first-time home-buyer credit.
    • The worksheet is available from IRS.   
    • Worksheet 8812, Page 3 is produced in view mode to show the calculation.
  •  How does military pay affect the calculation for the Additional Child Tax Credit (ACTC)?
    • The software automatically includes combat pay in the calculation for the Additional Child Tax Credit.
  •  Is a Social security number (SSN) required for child tax credit?
    • The taxpayer's child must have an SSN issued before the due date of their 20YY return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit. If the taxpayer's dependent child has an ITIN, but not an SSN, issued before the due date of their 20YY return (including extensions), they may be able to claim the $500 Other Dependent Credit for that child instead.
  •  Does the IRS assess a penalty if Form 8867 is not included on a return claiming one of these credits?

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