Schedule 8812

What is IRS Schedule 8812: Child Tax Credit Form?

IRS Schedule 8812 is found on Form 1040, and it’s used to calculate the alternative refundable credit known as “the additional child tax credit”. The additional child tax credit is considered a refundable credit which means that it entitles qualifying taxpayers to claim a refunded amount of the child tax credit if it exceeds their tax liability after factoring in the child tax credit. The additional child tax credit is worth up to $1,400 per child for tax year 2019. So, if you owe $0 in federal taxes but are eligible for the additional tax credit, you could earn up to $1,400 per qualifying dependent in 2019.

The United States federal tax law allows you to claim refundable credits on your tax return for qualifying children, which can lead to some pretty significant savings. Based on the amount of qualifying dependents you claim on your tax return, the IRS might require you to fill out Form 8812. IRS Form 8812 will need to be filed alongside your 1040, 1040A or 1040NR at the time of your tax return, and can’t be requested later in the tax year. Before you miss out on what could be some well-deserved savings, read up on the rules regarding Schedule 8812 to learn if you qualify and how you can claim the child tax credit.

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Qualifying Child Requirement

Before you can claim the Additional Child Tax Credit on Form 8812, you must evaluate whether your dependents meet all qualifying child requirements of the original Child Tax Credit. The child can be your:

Son
Daughter
Blood or step sibling
Stepchild
Foster child or the descendants of any of the above (such as a niece or grandchild)

The child must not turn 17 at any time during the tax year or provide more than half of their own financial support. Finally, each child you claim a credit for must have lived with you for more than half of the tax year. However, even if the child meets all of those requirements, you can't claim the credit unless you claim an exemption for each of them on your tax return; your mere eligibility to claim the child is insufficient.

Exceptions to the qualifying child requirement

The IRS provides some exceptions to the requirement that the child lives with you for more than half of the tax year. This includes any child that was born but then passed away within the same tax year, as long as your home was where the child had lived.

The IRS also treats your child as living with you when they're away at school or in a juvenile detention facility, or when you're away on business, receiving medical treatment, or on active duty in the military. A noncustodial parent may also claim the credit if the custodial parent agrees not to claim the credit or an exemption for the child.

Income limitations

If you meet all other requirements but the amount of tax you owe at the end of the year is either zero or an amount that's less than the credit, you can't claim the full Child Tax Credit of $2,000. However, you may be eligible for the reduced Additional Child Tax Credit if you complete Schedule 8812 and attach it to your Form 1040.

For most taxpayers, the credit may be reduced if you have adjusted gross income that's higher than the threshold that applies to your filing status. For example, if you file as single, head of household, married filing separately, or qualifying widow(er) taxpayer for the 2020 tax year and have more than $200,000 in adjusted gross income ($400,000 for joint filers), the credit reduces as the amount exceeding the limit increases.

You must have earned income

When you prepare Schedule 8812 and calculate the Child Tax Credit you're eligible for, you must calculate the amount of gross income that you earn. This amount will be entered on line 6a. Your earned income includes income you receive from work or by actively engaging in a business. It doesn't include most of the taxable income you earn from investing, such as the interest from a savings account or the profit you earn from trading stocks during the year. Unemployment benefits do not count as earned income, either.

Additionally, the Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020, as a stimulus measure to provide relief to those affected by the pandemic. For tax year 2020, the CAA allows taxpayers to use their 2019 earned income if it was higher than their 2020 earned income in calculating the Additional Child Tax Credit as well as the Earned Income Tax Credit (EITC).

How to file Form 8812?

First, complete the Child Tax Credit and Credit for Other Dependents Worksheet that applies to you. You can find instructions on line 19 of your Form 1040. If you qualify for the Additional Child Tax Credit, you'll then complete Schedule 8812 and attach it to your Form 1040.

You'll use Form 8812 to calculate your Additional Child Tax Credit. There are three parts to this form:

Part I should be completed by all filers. In Part I, you'll enter your Child Tax Credit amounts and your earned income.
Part II will only be completed by filers who have three or more qualifying children. To calculate the amount entered in Part II, line 9, there's a worksheet attached to Schedule 8812.
Part III gives you the amount you can claim for your Additional Child Tax Credit. You'll enter this amount on line 28 of your Form 1040.

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