I'm trying to understand how the child tax credit and earned income credit works and I can't seem to wrap my head around it! Which one allows more money in your refund?

Forum|Forum|6 years ago
May 31, 2019
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Best answer by bluedeb

You could qualify for both. The Child Tax Credit it is a nonrefundable federal tax credit which may be worth as much as $1,000 per child. That means it lowers your tax liability (income you are taxed on), you do not get the amount in your refund.

How does the Child Tax Credit work?

https://ttlc.intuit.com/replies/3301702

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The Earned Income Credit is a credit you get that is added to your refund amount. The credit is for up to 3 children, you can list more but you only get credit for 3.

Maximum Credit Amounts

The maximum amount of credit for Tax Year 2015 is:

$6,242 with three or more qualifying children
$5,548 with two qualifying children
$3,359 with one qualifying child
$503 with no qualifying children

2015 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates

https://www.irs.gov/Credits-&-Deductions/Individuals/Earned-Income-Tax-Credit/EITC-Income-Limits-Max...

bluedebAnswer

Employee

How does the Child Tax Credit work?

https://ttlc.intuit.com/replies/3301702

------------------------------------------

The Earned Income Credit is a credit you get that is added to your refund amount. The credit is for up to 3 children, you can list more but you only get credit for 3.

Maximum Credit Amounts

The maximum amount of credit for Tax Year 2015 is:

$6,242 with three or more qualifying children
$5,548 with two qualifying children
$3,359 with one qualifying child
$503 with no qualifying children

2015 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates

https://www.irs.gov/Credits-&-Deductions/Individuals/Earned-Income-Tax-Credit/EITC-Income-Limits-Max...

Hal_Al

Employee

" I can't seem to wrap my head around it!"
That's because the great American tax system has become convoluted mostly due to politics.
As you can see from the numbers above, the EITC potentially provides more money, but as you income goes up that changes.
You don't have to choose between them, you get both (except in the case of divorced or separated parents). The EITC amounts are totally refundable and you get the amounts in the table, regardless of your tax liability. The Child Tax Credit it is a nonrefundable federal tax credit, but, if you have more than $3000 of earned income, some or all of it is usually given to you thru the "Additional Child tax credit". That is, part of the CTC may be on line 43 of form 1040A instead of line 35 (lines 67 & 52 of form 1040). The ACTC is calculated on form 8812 and is basically 15% of your earned income over $3000.