# How does a Child Tax Credit work to reduce my taxes?

Let's say I make 100K a year from my business and I have 3 kids under 9 years old. I read that each child can give me \$2000 child tax credit.

So if my 100K business income is taxed and say its 40%:

100K x 40% (40K) = 60K take home

Does the child tax credit apply to the 100K first making it:

100K - 3 Kids (6K) = 94K income x 40% (37.6K) = 62.4K take home

OR is it:

100K x 40% (40K) = 60K + 6K child credit = 66K take home?

• Your federal income tax is never as much as 40%, and CTC (and ACTC) applies only to federal income tax. If you don't have significant other income your total (not marginal) federal tax will be around 20%, depending on other factors you didn't state. Yes you have self-employment tax (slightly less than 15.3%) on your Schedule C net income up to a limit (\$132,900 for 2019, \$137,700 for 2020) and 2.9% after that, and there are no deductions or credits on SE. You usually have state income tax also, and any provision in the state tax for children depends on the state. Commented Mar 6, 2020 at 4:51
• @dave_thompson_085 who knows income tax isn't 40%. "say its 40%". He was just using it to make the maths easy. Also the rest of your comment should be in an answer so that it can be up and down voted. Commented Mar 6, 2020 at 11:25
• @SamDean Federal Income Tax != Income Tax in general.
– ave
Commented Mar 6, 2020 at 12:35
• I have edited out your unrelated query about a self-employment tax credit, as we like to have only one question per post. If you have a question about self-employment taxes or credits, please start a new question. Commented Mar 6, 2020 at 13:18
• @dave_thompson_085 - Your comment has been flagged. It's "too good to be just a comment"! Do you mind posting this as an answer? Commented Mar 6, 2020 at 18:23