For the 2025 U.S. federal tax year, a taxpayer's Child Tax Credit exceeds the amount of tax they owe. Under the Additional Child Tax Credit (ACTC) rules, what happens to the unused portion of the credit?
- Up to $1,700 per qualifying child of the unused Child Tax Credit may be refundable through the Additional Child Tax Credit
- The unused credit is entirely forfeited because the Child Tax Credit is fully nonrefundable
- The entire unused Child Tax Credit amount is automatically refundable, with no per-child cap
- The unused credit can only be carried forward to reduce next year's tax liability; it cannot be refunded
Correct answer: A. Up to $1,700 per qualifying child of the unused Child Tax Credit may be refundable through the Additional Child Tax Credit
The Child Tax Credit is only partially refundable: when it exceeds the tax owed, the taxpayer may claim the Additional Child Tax Credit for the unused amount, capped for 2025 at $1,700 per qualifying child, computed on Schedule 8812. The second option is wrong because the credit is not fully nonrefundable — the ACTC exists specifically to refund a capped portion of the amount that could not be used against tax liability. The third option is wrong because the refundable amount is limited to $1,700 per qualifying child in 2025, not the full unused credit with no ceiling. The fourth option is wrong because the ACTC is a refund paid to the taxpayer in the current year, computed via Schedule 8812, rather than a carryforward applied to a future year's return.
Source: IRS Instructions for Schedule 8812 (Form 1040) (2025); IRS 'Child Tax Credit'