16172: 8812 - CTC, ACTC, and ODC FAQs (Drake18-Drake20)

The IRS has released information about the new Advance Child Tax Credit Payments in 2021. Additional information is available in Related Links below.

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 make the appropriate selection on the dependent screen to indicate a dependent's eligibility to ensure that the form and credits are calculated correctly. On screen 2, choose the appropriate code from the Eligible for Child Tax OR Other Dependent Credit drop list. Codes are as follows:

• C - Eligible for Child Tax Credit
• O - Eligible for Other Dependents Credit
• N - Not Eligible for Child Tax Credit OR Other Dependents Credit 

After being calculated, the CTC and ODC carry to

• Form 1040, line 12a (Drake18)
• Form 1040, line 13a (Drake19)
• Form 1040, line 19 (Drake20)

ACTC flows to:

• Form 1040, line 17b (Drake18)
• Form 1040, line 18b (Drake19)
• Form 1040, line 28 (Drake20). 

Calculations for the CTC and ACTC are pulled from entries made elsewhere in the software, however, there are overrides provided on the 8812 screen, located on the first Credits tab, for Form 8812, line 6 total earned income and Form 8812, line 9/Wks 8812, page 3, line 7.

Child Tax Credit
Maximum credit is $2,000 per child.

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 (IRS sometimes determines a child to be 17 on 12/31 if the child turned 17 on 1/1, which may require paper filing).

This credit is non-refundable, so if the tax liability is 0 (zero) there is nothing against which to apply the credit. See Publication 972, Child Tax Credit for details.

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 $1,400 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: 

• Schedule 8812, Child Tax Credit
• Instructions for Form 8812
• Publication 972, 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 the 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 14 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 and more instructions may be found in Publication 972:   

   

  • Worksheet 8812, Page 3 is produced in view mode to show the calculation. The result on line 15 of Wks 8812, page 3 is carried to Wks 8812, part 2, line 14 to be used in the calculation of CTC and ODC that shows on Form 1040. 

• 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. In order to qualify for the Additional Child Tax Credit, the taxpayer must meet the earned income limit ($2,500). A taxpayer who has earned income below that amount does not qualify 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.