Video: Child Tax Credit

In this lesson, join Nick Palazzolo, CPA, as he breaks down the intricacies of the child tax credit, providing clear examples to illustrate how taxpayers can leverage this credit for each qualifying child. Delving into the specifics, he explains the significance of the credit amount, eligibility criteria based on a child's age, and the income phase-out thresholds that affect the calculation. Nick also clarifies the concept of refundability and the additional child tax credit, emphasizing the necessary earned income level to qualify. Through practical scenarios, he demonstrates the step-by-step process to calculate the total credit amount, phase-out reductions, and the potential for claiming the refundable portion. Whether dealing with single or joint filers, he ensures a thorough comprehension of how to determine the child tax credit on an income tax return.

"Examprep.ai helped me pass all 4 CPA exams on the first try. I highly recommend. I especially like the feedback and ratings the software provides so I know where to focus my time."

Daniel H., CPA

"I can't recommend ExamPrep.ai enough. Nick's lessons turned concepts I struggled with into strengths. I was able to pass FAR right before other exams expired!"

Andrew K, CPA

"I just want to say thank you for the great lesson videos. I couldn't stay awake through lectures of another course. After watching all your FAR lessons I was finally able to pass!"

Alyssa M., CPA Candidate

Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

Cite this lesson

Link to this page

[[ citeExample ]]

Copy to clipboard

Copy URL to clipboard

Copy HTML to clipboard

And moving on to the child tax credit, as we promised, we've got a different credit here. We've got the credit amount. Taxpayers can claim a $2,000 credit for each qualifying child. Take note, we're not capped out at two children or anything. We can just keep going. If you have 20 children, then you get 20 times 2,000. Now, in order to be eligible, the child must be under the age of 17 at the end of the tax year. The phase-out amounts, we do have phase-out amount here. This is how the rule works. We will see an example of how it works as well. Make sure you memorize that phase-out amount. And refundability, this is refundable. The refundable part is known as the additional child tax credit, just something to know there. Take note of, and let's run through an example of how it works. All right, so here we're going to assume a single parent with an AGI of $210,000 as two qualifying children under the age of 17. For the current year, the phase-out thresholds are $400,000 for married couple and $200,000 for single filers, head of household, and qualifying widow or widower filers. Additionally, for this year, the maximum refundable amount is $1,400 per qualifying child. In order to claim the ACTC, taxpayers must have earned income of at least $2,500 in the tax year. So lots of rules, requirements, regulations, making sure we are good to go. Now, I think quite evidently we have much more than $2,500 of earned income. I mean, maybe this is all passive income, but I think we can go into the assumption this is probably just W-2 earned income, something like that. What are the steps here? First, we're going to calculate the total credit amount. Well,

Unlock the full video transcript and subtitles support with a free account!

Get more from this lesson

Create an account 7-day free trial. No credit card required.

Federal Taxation of Individuals: Passive Activity, & Tax Credits

Module: 2 Concepts, 28 Videos

Passive Activity Losses & Loss Limitations Overview

1:33

Introduction to Passive Activity Losses and Loss Limitations

7:43

Recourse vs. Nonrecourse Liabilities

6:01

Tax Basis vs. At-Risk Basis