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How are the child care tax credits different?

By Mark J.

Updated for tax year 2017

Child Care Tax Credits Q&A Series - TaxAct BlogSimilar but not the same

The Child Tax Credit (CTC) is a credit for up to $1,000 per qualifying child under age 17. It’s reduced as your income reaches certain phase-out limits.

It’s also nonrefundable, which means it’s limited to your tax liability. Your tax liability is the amount of tax you owe the IRS during a given year. Any portion of the child care credit in excess of your tax liability is not paid out in a tax refund.

While you can’t take the full CTC if you owe less income tax than the credit amount,  you may qualify to claim the Additional Child Tax Credit (ACTC). The ACTC is a refundable credit. That means you can take the child care credit even if you don’t owe any income tax – or if the amount you owe is low.

To qualify for the ACTC, you need more than $3,000 in earned income.

The CTC determines your eligibility for the ACTC. If you don’t qualify for the CTC, you can’t take the ACTC.

About Mark J.

Mark J. is a tax analyst at TaxAct.

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