• If a taxpayer’s tax liability is less than the nonrefundable CTC, as discussed on page 89, then the taxpayer may be able to claim the refundable ACTC.
  • TaxSlayer computes this credit automatically; calculations are shown on Schedule 8812, part of a full PDF for the return.
  • ACTC is normally limited to 15% of any earned income above the current year starting point (for 2024 this remains $2,000), but taxpayers with three or more children may also be eligible for ACTC regardless of income. However, ACTC is limited to the amount of FICA plus Medicare tax paid (on W-2s) minus the EIC received by the taxpayer.
    • Note: For self-employment, earned income is calculated by taking the amount on Schedule 1 Line 3 (Business income) minus the amount on Schedule 1 Line 15 (deductible part of self-employment tax).
  • The total of the two credits (Line 19, the nonrefundable child tax credit amount, plus Line 28, refundable) remains $2,000 or less per eligible child for 2024.
  • If the CTC and/or ACTC was reduced or disallowed in a prior year and the taxpayer is now – appropriately – claiming one or both of those credits, go to the Information to Claim Certain Refundable Credits After Disallowance menu page [Deductions > Credits Menu > Claiming Refundable Credits after Disallowance > ...], reachable via the search box by entering 8862, and select “Claim CTC/ACTC After Disallowance”. 
    • Note: If the IRS makes a final determination that the AOTC claim was due to reckless or intentional disregard of the rules, the taxpayer is barred from claiming that credit for the following two tax years, and should not file Form 8862 in either of those years. If the final determination is that fraud was involved, the prohibition is for ten years rather than two; do not file Form 8862 during this ten-year period.  
    • Note: Once a Form 8862 has been filed, it is not necessary to file that form in future years unless a claim for this credit is again reduced or disallowed.

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