Can I Still Receive the Child Tax Credit If I Owe No Taxes?

Types of Credits

For someone who owes no income tax, the key difference between the standard Child Tax Credit and the Additional Child Tax Credit is that additional credit is "refundable," while the standard one is not. A non-refundable credit can cut your taxes only to zero but won't produce a refund beyond that. A refundable credit produces a refund. For example, if your tax liability is $300 and you have a $1,000 non-refundable tax credit, then all you can do is claim $300 of the credit. If that $1,000 credit were refundable, then you'd get the $700 difference back as a tax refund. If you owe nothing in taxes, then the non-refundable Child Tax Credit has no effect. But the refundable Additional Child Tax Credit will get you money back from the government.

To take the standard Child Tax Credit, fill out the worksheet included in the instructions for your federal tax return. Even if you have no income tax liability, and you therefore can't take this credit, you still must complete the worksheet, because you'll need it to fill in the form to claim the Additional Child Tax Credit. On the worksheet, you determine whether you must reduce your credit based on your income or other deductions you qualify for.

Once you've filled out the Child Tax Credit worksheet, use IRS Form 8812 to determine whether you qualify for the Additional Child Tax Credit. On this form, start with the total amount of your child credit, as calculated on the worksheet. How much of that amount you can claim as the Additional Child Tax Credit depends on your earned income.

Earned income is money you receive from working --- either at a regular job or from self-employment --- plus any non-taxable combat pay you may have earned. It doesn't include income from interest, Social Security benefits, unemployment compensation or alimony. You can't claim the Additional Child Tax Credit unless you have earned income above a certain amount. As of 2010, you must have had at least $3,000 in earned income to receive the credit. The amount of the credit is equal to 15 percent of all your earned income above $3,000, up to the total amount calculated on the Child Tax Credit worksheet.