What this line means
The larger of the 15% earned income method (line 20) or the Social Security tax excess method (line 21). If you have fewer than three qualifying children, this line equals line 20 because line 21 does not apply. If you have three or more children, you compare both methods and take whichever is greater. This produces the maximum earned income-based limit for your additional child tax credit.
Does this apply to you?
- You are computing the additional child tax credit and need the earned income-based ceiling
- You have three or more children and need to compare both computation methods
Easy to overlook
Filers with fewer than three children skip line 21 If you have one or two qualifying children, line 21 is blank and line 22 simply equals line 20. The comparison only matters for families with three or more children. Tax software handles this automatically, but paper filers sometimes try to complete line 21 with only one or two children. 1 IRS Schedule 8812 instructions — line 22 computation
The larger method changes depending on your income level At very low income levels, the Social Security tax method often wins because FICA taxes accumulate even on the first dollar of earnings, while the 15% method only kicks in above $2,500. As income rises, the 15% method overtakes the Social Security method. The crossover point depends on family size and EIC claimed. 2 IRC Section 24(d)(1)(B) — use the more favorable method
Watch out for this
Choosing the smaller of the two methods instead of the larger. The instructions say to enter the larger amount. Using the smaller amount understates the additional child tax credit. This is a benefit provision — you want the bigger number.
Footnotes
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IRS Schedule 8812 Instructions, Line 22. https://www.irs.gov/instructions/i1040s8 ↩
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IRC Section 24(d)(1)(B), More Favorable Method. https://www.law.cornell.edu/uscode/text/26/24 ↩