Question

What’s the difference between the child tax credit and a dependent exemption?

Answer

An exemption will directly reduce your income. A credit will reduce your tax liability.

A dependent exemption is the income you can exclude from taxable income for each of your dependents. In 2020, you can exclude $4,300 for each dependent.

The child tax credit:

  • Is a credit that offsets the tax you owe dollar for dollar
  • Is available if you have a child younger than age 17 at the end of the year
  • Can reduce your tax by as much as $1,000, (2003 – 2020, through the Working Families Tax Relief Act) for each qualifying child

You can only claim the child tax credit if you claim the child as a dependent.

If you meet the requirements, you can claim an exemption for a dependent on your return and the child tax credit for that dependent.

Related Topics

Related Resources

IRS Name Change

Is there an IRS name change form? Learn more about name changes with the IRS and get tax answers at H&R Block.

First Apartment Expenses

Can you get deductions for your child's college expenses? Learn if you qualify for tax credits and deductions. Get tax answers from H&R Block.

Deducting Your Self-Employed Vehicle Expenses

What vehicle expenses are you allowed to deduct when you are self-employed? Learn more from the tax experts at H&R Block.

Missouri State Tax

Do you earn an income in Missorui? Learn more about Missouri state and income tax, with help from the tax pros at H&R Block.