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Many of my clients have children and I wanted
to take a moment to outline one of the many benefits available on
your tax return for parents with children. Its known as the Child
Tax Credit and can really help your tax bottom line if it applies to
you.
- Amount - With the Child Tax Credit, you may
be able to reduce your federal income tax by up to $1,000 for
each qualifying child under the age of 17.
- Qualification - A qualifying child for this
credit is someone who meets the qualifying criteria of six
tests: age, relationship, support, dependent, citizenship, and
residence.
- Age Test - To qualify, a child must have
been under age 17 – age 16 or younger – at the end of 2009.
- Relationship Test - To claim a child for
purposes of the Child Tax Credit, they must either be your son,
daughter, stepchild, foster child, brother, sister, stepbrother,
stepsister or a descendant of any of these individuals, which
includes your grandchild, niece or nephew. An adopted child is
always treated as your own child. An adopted child includes a
child lawfully placed with you for legal adoption.
- Support Test - In order to claim a child
for this credit, the child must not have provided more than half
of their own support.
- Dependent Test - You must claim the child
as a dependent on your federal tax return.
- Citizenship Test - To meet the citizenship
test, the child must be a U.S. citizen, U.S. national, or U.S.
resident alien.
- Residence Test - The child must have lived
with you for more than half of 2009. There are some exceptions
to the residence test, which we can walk you through if you have
questions.
- Limitations - The credit is limited if your
modified adjusted gross income is above a certain amount. The
amount at which this phase-out begins varies depending on your
filing status. For married taxpayers filing a joint return, the
phase-out begins at $110,000. For married taxpayers filing a
separate return, it begins at $55,000. For all other taxpayers,
the phase-out begins at $75,000. In addition, the Child Tax
Credit is generally limited by the amount of the income tax you
owe as well as any alternative minimum tax you owe.
- Additional Child tax Credit - If the amount
of your Child Tax Credit is greater than the amount of income
tax you owe, you may be able to claim the Additional Child Tax
Credit.
If you have questions about this beneficial
credit please call our offices.
Michael T. McCormick, JD, LL.M.
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