Question

Trey claims a dependency exemption for both of his daughters, ages 14 and 17, at year-end. Trey files a joint return with his wife.

What amount of child credit will Trey be able to claim for his daughters under each of the following alternative situations?

A. His AGI is $102,300

B. His AGI is $121,800

C. His AGI is $127,000, and his daughters are ages 10 and 12

Answer 1

Situations A

The amount of child credit which Trey will be able to claim for his daughters when his AGI is $102,300 is $1,000. Since Trey’s AGI is less than the phase-out threshold of $110,000 for a joint return, Trey can claim $1,000 child tax credit ($1,000 × 1 eligible child). Note that a child must be underage 17 at year end to qualify for the child tax credit.

Situation B

Trey may claim a child tax credit of $400, calculated using the steps below.

(1) $121,800 AGI – $110,000 MFJ threshold = $11,800.

(2) $11,800 excess AGI divided by 1,000 = 12 [note: round up from 11.8]

(3) 12 × 50 = $600. This is the amount of the phase-out.

(4) $1,000 allowable credit minus $600 = $400

Situation C

Trey may claim a child tax credit of $1,150, calculated using the steps below.

Note that Trey now has two children under age 17 at year end that qualify for the child tax credit.

(1) $127,000 AGI – $110,000 MFJ threshold = $17,000.

(2) $17,000 excess AGI divided by 1,000 = 17

(3) 17 × 50 = $850. This is the amount of the phase-out.

(4) $2,000 allowable credit minus 850 = $1,150