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Federal and New York State Child Tax Credits

Reducing Your Family Tax Bill

Federal Child Tax Credits

The Child Tax Credit (CTC) is a tax benefit offered by the federal government for taxpayers raising dependent children under the age of 17. It is designed to reduce or eliminate a taxpayer’s federal income tax liability and may provide a refund of any CTC remaining after the taxpayer’s liability has been met.

Benefits:

Workers eligible for the Child Tax Credit will receive it as a refund of some or all of the income tax withheld from their pay during the year, or as a reduction of income tax they otherwise would have to pay to the IRS with their tax return. Workers earning above $3,000 in 2012 may also receive an Additional Child Tax Credit (the refundable CTC).

• The Credit is worth up to $1,000 for each dependent child under 17 claimed on the family’s tax return. The CTC is first used to reduce or eliminate a family’s income tax liability. Families may be able to get all or part of any remaining CTC as a refund through the Additional Child Tax Credit (the refundable CTC).
• • For tax year 2012, the refundable Additional CTC is based on the amount by which the income of a worker (and spouse, if married) exceeds $3,000. Families with CTC remaining after their income tax liability has been eliminated may receive a refund in the lesser of two amounts: (1) the amount of the family's CTC that remains, or (2) 15% of the family's earned income over $3,000.
• The maximum CTC amount of $1,000 per child is available to single parents with incomes up to $75,000, married parents filing separately with an income up to $55,000 and married parents filing jointly with combined incomes up to $110,000. The credit gets smaller as income increases beyond these levels.

Eligibility:

All taxpayers who have qualifying children and meet income threshold guidelines are eligible for the Child Tax Credit, though the amount of the credit depends on the parent’s income and tax liability.

For the purposes of determining eligibility for the CTC, “qualifying children” are:

• children, grandchildren, stepchildren, and adopted children
• brothers, sisters, stepbrothers, stepsisters, as well as descendents of such relatives
• foster children who are placed with the worker by an authorized private or governmental placement agency.

A child claimed for the CTC must be under age 17 at the end of 2012. The child must live with the worker for more than half of the year in the U. S. and must be either a citizen or resident alien. The child must have either a Social Security Number or an Individual Taxpayer Identification Number (ITIN).

New York’s Empire State Child Credit

The Empire State Child Credit is a refundable credit for full-year New York State residents who:

1. have a federal child tax credit or a federal additional child tax credit and a qualifying child, or
2. meet certain income thresholds and have a qualifying child. A qualifying child is a child who qualifies for the federal child tax credit and is, at least, four years old. For low- and moderate-income taxpayers, the credit equals the greater of $100 per qualifying child or 33 percent of the taxpayer’s allowed federal child credit.

Examples:

• • Maxine is a single parent with a 12-year-old dependent child and earned $16,000 in 2012. She has no income tax liability. Fifteen percent of Maxine's earnings over $3,000 are $1,950. Since her remaining CTC of $1,000 is less than $1,950, Maxine is eligible to receive an Additional CTC for the lower amount - $1,000. Her Empire State Child Credit is $330. She is also eligible for a federal EITC of $3,169 and a state EIC of $951, bringing her total refundable credits to $5,450.
• • Sam and Barbara are married workers, raising four children over age four but under age 17. They earned $25,000 in 2012 and have no federal income tax liability. Their maximum CTC is $4,000, (4 children X $1,000). However, since the couple has no federal income tax liability, none of their CTC is used - the full $4,000 remains. Since this is more than 15% of their earnings above $3,000, Sam and Barbara receive an Additional CTC of $3,300. They also qualify for Empire State Child Credits of $1,089 (33% of the $3,300 federal CTC). They also qualify for a federal EITC of $5,317 and a state EIC of $1,495. This brings their total refundable credits to $11,201.

The Child Tax Credit does not affect the taxpayer’s eligibility for the Earned Income Tax Credit or the Child and Dependent Care Credit. But, because the federal Child and Dependent Care Tax Credit is counted before figuring the Child Tax Credit and may completely eliminate any income tax liability, that may affect the size of the CTC received by the family.

How to Claim the Federal CTC and the Empire State Child Credit:

To receive the Child Tax Credit, a worker must file either federal Form 1040 or 1040A and complete the Child Tax Credit Worksheet to determine how much of the income tax owed is reduced or eliminated by the $1,000 per child CTC and enter that amount on the form. If the CTC eliminates the income tax, the Worksheet instructions direct workers to, then, complete Form 8812, “Additional Child Tax Credit,” to determine if they qualify for an additional refund. If so, that amount is also entered on the tax form. The Form 8812 must also be attached to the tax return to claim the additional refund amount.

Low-income workers can get free help with federal tax preparation through a program called Volunteer Income Tax Assistance (VITA). For information, call 1-800-TAX-1040 (1-800-829-1040).

To claim New York’s Empire State Child Credit, a taxpayer must complete and then submit the form IT- 213 Claim for the Empire State Child Credit with his or her tax return.

Federal Tax Forms

Forms and instructions are available on the Internal Revenue Service website.

NYS Tax Forms

Forms and instructions are available on the New York State Department of Taxation and Finance website.