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

Common Tax Questions Roundup

Here are the top tax questions our professionals got this year – with answers for you! How can you use this? Read on to get answers from H&R Block.

Amend Your Return To Correct Filing Status

Did you use the wrong filing status by mistake? Discover how to amend your filing status. Learn more from the tax experts at H&R Block.

Claiming A Newborn On Taxes

If you were pregnant most of the year, can you claim you baby or newborn child on your taxes? Get tax answers from the experts at H&R Block.

Deduct State Sales Tax

Can you deduct your state sales tax? Learn more from the tax experts at H&R Block.