Regarding the Child Tax Credit (CTC) for tax years 2018-2025, which of the following statements is correct regarding the refundable portion (Additional Child Tax Credit)?

Answer options:

The entire $2,000 credit is fully refundable regardless of earned income.

The credit is nonrefundable.

The refundable portion is limited to 15% of earned income in excess of $2,500.

The credit is only available for children under age 13.

How to approach this question

Recall the formula: Refundable = 15% * (Earned Income - $2,500). Also capped at a specific dollar amount per child.

Full Answer

C.The refundable portion is limited to 15% of earned income in excess of $2,500.✓ Correct

The Additional Child Tax Credit (refundable portion) is limited to 15% of the taxpayer's earned income in excess of $2,500. (It is also capped at a specific dollar amount per child, e.g., $1,700+ indexed, but the 15% rule is the structural calculation).

Common mistakes

Confusing the age limit (17 for CTC, 13 for Dependent Care).

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