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Tuesday Tax Tips •
2/8/11 |
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Ten Facts about the Child Tax Credit
The Child Tax Credit is an important tax credit that
may be worth as much as $1,000 per qualifying child depending upon
your income. Here are 10 important facts about this credit and how
it may benefit your family.
1. 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.
2. Qualification - A qualifying child
for this credit is someone who meets the qualifying criteria of six
tests: age, relationship, support, dependent, citizenship, and
residence.
3. Age Test - To qualify, a child
must have been under age 17 – age 16 or younger – at the end of
2010.
4. 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.
5. Support
Test - In order to claim a child for this credit, the child
must not have provided more than half of their own support. 6.
Dependent Test - You must claim the child as a
dependent on your federal tax return.
7. Citizenship
Test - To meet the citizenship test, the child must be a
U.S. citizen, U.S. national, or U.S. resident alien.
8.
Residence Test - The child must have lived with you for
more than half of 2010. There are some exceptions to the residence
test. Call me if this is an issue.
9. 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.
10.
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 I can
help with an analysis of this deduction give me a call. It can
really help put money back in your pocket and ease the cost of
raising children.
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