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A child tax credit is a tax credit based on the number of dependent children in a family.

In the United Kingdom, a family with children and an income below about £58,000 can claim child tax credit on top of child benefit. The tax credit is "non-wastable" - i.e. it is paid whether or not the family has a net tax liability - and is paid in or out of work. Higher rates are paid for disabled children. It is integrated with the working tax credit, which also provides support for childcare costs.

For those with an income below £50,000 this is worth £545 a year as a family element (£1,090 if they have a baby under 1 year old).

For those with low incomes, there is an additional £1,765 per child per year, and this is tapered away at a rate of 37% as earnings increase above £14,155 per year.

There are many different credits that a taxpayer can claim. One of the most common is the Child Tax Credit, provided by 26 U.S.C. Sec. 24. The Child Tax Credit reduces tax liability.

For many families, the child tax credit will exceed their tax liability. In many such cases, the unused portion of the child tax credit is refundable as the "additional child tax credit." The amount that is available as a refund depends on the amount of earned income, and in certain circumstances the amount of social security and medicare taxes paid. Refer to IRS form 8812 and instructions.

It is available to taxpayers who have a “qualifying child.” A person is a “qualifying child” if he or she has not attained the age of 17 by the end of the taxable year and meets the requirements of 26 U.S.C. Sec. 152(c). In general, a qualifying child is any individual for whom the taxpayer can claim a dependency exemption and who is the taxpayer’s son or daughter (or descendent of either), stepson or stepdaughter (or descendent of either), or eligible foster child.

The per-child amount was originally set at $400 in 1998, and has since increased to $1000 through tax-year 2010. There is a sunset provision to the Act that set this amount which will bring the amount down to $500 per-child in 2011. However, this credit is phased-out for taxpayers above certain thresholds defined in 26 U.S.C. Sec. 24(b)(2). If the taxpayer’s taxable income is over the threshold, the total credit decreases by $50 for each $1000 (or part thereof) over the threshold.

A taxpayer’s total tax credit is refundable to the extent of 15% of the taxpayer’s earned income over $11,750 (an amount adjusted for inflation IAW 26 U.S.C. Sec. 24(d)(3)) and under the threshold. Unless a married couple files jointly, a qualifying child will be treated as such for the purpose of the Child Tax Credit for the taxpayer who is the child’s parent, or if not a parent, the taxpayer with the highest adjusted gross income for the taxable year in accordance with 26 U.S.C. Sec. 152(c)(4)(A). If more than one parent claims the child and do not file a joint return, the child will be treated as a qualifying child of the parent with whom the child resided for the longest period during the taxable year, and if the child resided with each parent equally, with the parent who has the highest adjusted gross income in accordance with 26 U.S.C. Sec. 152(c)(4)(B).

• Samuel A. Donaldson, Federal Income Taxation of Individuals: Cases, Problems and Materials, 2nd Edition (St. Paul: Thomson/West, 2007)