What this line means
Fifteen percent of your earned income over $2,500 from line 19. This is the earned income method for computing the additional child tax credit. The result sets a limit on how much of the excess CTC can be refunded. For example, if you earned $22,500 over the threshold, 15% produces $3,375 — meaning up to $3,375 of excess CTC could be refunded (subject to the per-child cap).
Does this apply to you?
- You have earned income over $2,500 and are computing the refundable additional child tax credit
- You need to compare this earned income method against the excess CTC and per-child cap
Easy to overlook
Higher earned income produces a larger refundable credit The 15% rate means every additional $1,000 of earned income above $2,500 adds $150 to the potential refundable credit. A family earning $30,000 with two children and a $4,400 CTC ($2,200 per child) can get up to $3,400 refunded (limited by the $1,700-per-child ACTC cap). Filers who increase their earned income — by working more hours or reporting all self-employment income — directly increase this credit. 1 IRC Section 24(d)(1)(B)(i) — 15% computation
This amount is still limited by the per-child cap Even if 15% of your earned income produces a large number, the additional child tax credit cannot exceed line 17 (qualifying children times $1,700) or line 15 (the excess credit over tax). The 15% figure is one of several limits — the smallest one controls. 2 IRS Schedule 8812 instructions — line 20 calculation
Watch out for this
Using 15% of total earned income instead of 15% of earned income over $2,500. The $2,500 is subtracted first on line 19, then you multiply by 15%. Applying 15% to total earned income inflates the result and overstates the refundable credit.
Footnotes
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IRC Section 24(d)(1)(B)(i), 15% of Earned Income Computation. https://www.law.cornell.edu/uscode/text/26/24 ↩
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IRS Schedule 8812 Instructions, Line 20. https://www.irs.gov/instructions/i1040s8 ↩