Detailed Example

Steve and Gretchen Leaf have 4 children who are all qualifying children for the child tax credit. Steve and Gretchen's adjusted gross income (AGI) ( Form 1040, line 34) is $112,000. This amount represents Steve's salary and is considered taxable earned income. They will file a joint return. Assume that their tax (Form 1040, line 42) is $2,000.

Steve and Gretchen have the 2001 Form 1040 tax package and instructions. They want to see if they qualify for the child tax credit, so they follow the steps for line 48 in the instructions.

Step 1. In Step 1 of those instructions Steve and Gretchen determine all four children qualify for the child tax credit.

Step 2. The Leafs check the box in column (4) of line 6c on Form 1040 for each child.

Step 3. In Step 3 the Leafs find out they must use Publication 972 to figure their child tax credit because their AGI is more than $110,000. When they read Publication 972, they find out they must complete the Child Tax Credit Worksheet which begins on page 3.

Completing the Child Tax Credit Worksheet. Steve and Gretchen fill out the worksheet (shown here) to find out how much child tax credit they can claim.

1. Steve and Gretchen enter the number of qualifying children (4) and multiply 4 by $600 and enter the result ($2,400) in the box for line 1.
2. They enter their AGI ($112,000) in the box for line 2.
3. They enter -0- in the box for line 3 since they did not exclude any income from Puerto Rico or any income on Form 2555, Form 2555-EZ, or Form 4563.
4. They add $112,000 and $0 and enter the result ($112,000) in the box for line 4.
5. They enter $110,000 in the box for line 5 since they will file a joint return.
6. They check the "Yes" box in line 6 since the amount on line 4 ($112,000) is more than the amount on line 5 ($110,000). They subtract line 5 ($110,000) from line 4 ($112,000) and enter the result ($2,000) in the box for line 6.
7. They multiply the amount on line 6 ($2,000) by 5% (.05) and enter the result ($100) in the box for line 7.
8. They check the "Yes" box in line 8 since the amount on line 1 ($2,400) is more than the amount on line 7 ($100). They subtract line 7 ($100) from line 1 ($2,400) and enter the result ($2,300) in the box for line 8.
9. They enter the amount from line 42 of their Form 1040 ($2,000) in the box for line 9.
10. Steve and Gretchen did not have any of the credits on lines 43, 44, 45, 46, or 47 of Form 1040, so they enter -0- in the box for line 10.
11. They check the "No" box on line 11 because they are not claiming any of the credits shown on line 11. They enter -0- in the box for line 11.
12. They subtract the amount on line 11 ($0) from the amount on line 9 ($2,000) and enter the result ($2,000) in the box for line 12.
13. They check the "Yes" box in line 13 since the amount on line 8 ($2,300) is more than the amount on line 12 ($2,000). They enter the amount from line 12 ($2,000) in the box for line 13. Their child tax credit is $2,000. They enter $2,000 on line 48 of their Form 1040.

Steve and Gretchen read the TIP in the worksheet and find that they may be able to take the additional child tax credit because they checked the "Yes" box in line 13.

Steve and Gretchen complete their Form 1040 through line 62 and use Form 8812 to see if they can claim the additional child tax credit.

Completing Form 8812.

1. They enter the amount from line 8 of their Child Tax Credit Worksheet ($2,300) on line 1.
2. They enter the amount from line 13 of their Child Tax Credit Worksheet ($2,000) on line 2.
3. Steve and Gretchen subtract the amount on line 2 ($2,000) from the amount on line 1 ($2,300) and enter the result ($300) on line 3.
4. They read the instructions on the back of the form and answer "No" to each of the four questions. They enter the amount from line 7 of their Form 1040 ($112,000) on line 4.
5. Since the amount on line 4 ($112,000) is more than $10,000, they check the "Yes" box and subtract $10,000 from the amount on line 4 ($112,000) and enter the result ($102,000) on line 5.
6. They multiply the amount on line 5 ($102,000) by 10% (.10) and enter the result ($10,200) on line 6. Next, they are asked if they have three or more qualifying children. Steve and Gretchen check the "Yes" box. Since line 6 ($10,200) is more than line 3 ($300), they skip Part II and enter the amount from line 3 ($300) on line 13. This $300 is their additional child tax credit. They also enter this amount on line 63 of their Form 1040.

Steve and Gretchen will get a child tax credit of $2,000 and an additional child tax credit of $300 for the year.

Leaf's Child Tax Credit Worksheet page 1

Leaf's Child Tax Credit Worksheet page 2

Leaf's Filled-in Form 8812

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