Tax terminology and all of its acronyms are often confusing. Sure, the acronyms simplify the words, but do they really help to simplify the meanings? While the answer is most likely a resounding “NO!”, there are several acronyms you’ll want to keep an ear out for during tax season.
In this post, we will briefly dive into three refundable credits: CTC, ACTC, and ODC.
CTC / ACTC – Child Tax Credit / Additional Child Tax Credit
What you need to know:
The maximum amount of CTC per qualifying child is $2,000. The refundable part of the credit (ACTC) is worth up to $1,400 for each qualifying child.
A qualifying child must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions).
CTC/ACTC begins to decrease in value if your gross incomes exceed $200,000 ($400,000 for Married Filing Jointly).
ACTC is not allowed if you or your spouse (if filing a joint return) file a Form 2555 or Form 2555EZ (excluding foreign earned income).
Who is a qualifying child for CTC/ACTC? The child must:
Be under the age of 17 at the end of the tax year.
Meet the relationship and residency tests for a uniform definition of a qualifying child.
Not provide more than half of his or her own support for the tax year
Have lived with you for more than half the tax year (however, there are exceptions for birth or death during the year, temporary absences, kidnapped or missing, or children of divorced or separated parents)
Be claimed as a dependent on your return
Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes)
Be U.S. citizen, U.S. National, or a U.S. resident alien.
Must have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions).
ODC – Other Dependent Credit
According to the IRS, beginning with the tax year 2018 and through the tax year 2025, you may be able to claim ODC for each eligible dependent who can't be claimed for the child tax credit.
For ODC, it is important to remember that this is a non-refundable tax credit of up to $500 per qualifying person. What’s more, the credit begins to decrease in value if your adjusted gross income exceeds $200,000 (or $400,000 if married filing jointly).
Who is a qualifying dependent for ODC? The dependent must be:
A dependent claimed on your return.
A dependent who can't be claimed for the CTC/ACTC.
A U.S. citizen, U.S. national, or U.S. resident alien.
It’s important to note that a dependent is not required to have an SSN. They can have an SSN, ITIN, or ATIN that was issued before the due date of the return (including extensions).
We know you may still have questions about the CTC/ACTC and ODC, so reach out to us today! We’re here to help.
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