State and National Standards
One to two hours
- Technology
- Civics/Government
- Family and Consumer Sciences
- History/Social Studies
- Economics
To help students understand the child tax credit and additional child tax credit
Students will be able to
- distinguish between a refundable tax credit and a nonrefundable tax credit.
- explain how the nonrefundable child tax credit affects the tax liability.
- explain how the refundable additional child tax credit affects tax liability.
- apply the requirements to claim the child tax credit and additional child tax credit, including the requirements for the child and the taxpayer.
- apply the limits on the amount of credit available for the child tax credit and the additional child tax credit.
The child tax credit allows taxpayers to claim a tax credit of up to $1,000 per qualifying child under the age of 17. This reduces their tax liability, potentially to $0. In order to claim the credit, the taxpayer and child must meet numerous requirements.
When a taxpayer's child tax credit is more than their tax liability, they may be eligible to claim an additional child tax credit as well. The additional tax credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give a taxpayer a refund even if they do not owe any tax.
Taxpayers must meet additional requirements to claim this credit.
A nonrefundable tax credit allows taxpayers to lower their tax liability to zero, but not below zero. The child tax credit is nonrefundable.
A refundable tax credit allows taxpayers to lower their tax liability to zero and still a receive a refund. The additional child tax credit is refundable.
Tax Credit
A dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed.
Refund
Money owed to taxpayers when their total tax payments are greater than the total tax liability. Refunds are received from the government.
Distribute Fact Sheet-Claiming Child Tax Credit and Additional Child Tax Credit. Use the following questions to prompt students to share what they know about the credits:
- What is the difference between a refundable and nonrefundable tax credit? (A nonrefundable tax credit allows taxpayers to lower their tax liability to zero, but not below zero. A refundable tax credit allows taxpayers to lower their tax liability to zero and still receive a refund.)
- Can you think of any tax credits that are for taxpayers with children? (There are several tax credits for taxpayers with children. The two credits covered in these materials concern child tax credit and additional child tax credit.)
Then, explain that this lesson covers the requirements for claiming the child tax credit and additional child tax credit.
Note: For students who may want to work independently on this module, refer them to Student Lesson-Claiming the Child Tax Credit and Additional Child Tax Credit.
Direct students to Tax Tutorial-Claiming Child Tax Credit and Additional Child Tax Credit, and explain that this tax tutorial focuses on the child tax credit and additional child tax credit. Tell students that they will learn about the requirements to claim both of these tax credits. Then they will learn the difference between a refundable tax credit and a nonrefundable tax credit. Inform students that they will have an opportunity to see how both tax credits are reported on tax forms.
Online Activity
Direct students to Simulation 8-Claiming Child Tax Credit and Additional Child Tax Credit. Explain to students that they will use the information provided to compute the child tax credit and additional child tax credit for Scott Newberry.
After students have completed Tax Tutorial-Claiming Child Tax Credit and Additional Child Tax Credit and Simulation 8-Claiming Child Tax Credit and Additional Child Tax Credit, ask them whether they have any questions about the child tax credit or additional child tax credit. To ensure they understand the material, ask the following questions:
- What tax credit is nonrefundable: the child tax credit or the additional child tax credit? (child tax credit)
- If a taxpayer is not able to use the entire credit from the initial child tax credit, what other tax credit might they use? (additional child tax credit).
Assessment
As a final review, summarize the major lesson points. Remind students that the child tax credit is a nonrefundable credit that allows qualifying taxpayers to reduce their tax liability.
If a taxpayer is not able to use the entire credit from the maximum $1,000 per qualifying child, they may be eligible for the additional child tax credit, which is a refundable tax credit.
When students are comfortable with the material, have them complete Assessment-Claiming Child Tax Credit and Additional Child Tax Credit.
