The following post is a chapter in the TaxAssurances’ book, “Top 12 Tax Deductions You Might Have Missed. Tax Tips For People Who Do Their Own Federal Taxes.”
You can purchase the full book on Amazon.
Chapter 1 Child Tax Credit
Besides being a blessing to a parent’s life, children can provide some real tax benefits. There are a few to consider.
First and foremost, they increase the number of exemptions and deductions a parent can have on their tax return. That’s a great start. But in this chapter, we’ll specifically discuss the child tax credit.
The $1,000 credit per child helps lower a parent’s tax liability for the year. And parents can use the credit for each one of their children.
There are some requirements to take the child tax credit and the IRS has provided some guidance. Here’s exactly what they say:
A qualifying child for purposes of the child tax credit is a child who:
1. Is your son, daughter, stepchild, foster child, adopted child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, your grandchild, niece, or nephew),
2. Will be under age 17 at the end of the year,
3. Did not provide over half of his or her own support for the year,
4. Lived with you for more than half of the year (with certain exceptions),
5. Is claimed as a dependent on your return,
6. Does not file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid), and
7. Was a U.S. citizen, a U.S. national, or a U.S. resident alien. For more information, see Pub. 519, U.S. Tax Guide for Aliens. If the child was adopted, see Adopted child, later.
Now, it is worth noting that the IRS imposes limits on taking the credit. Also, some parents may not be able to take the credit at all. Here’s what they says about those limits specifically:
You must reduce the maximum credit amount of $1,000 for each child if either (1) or (2) applies.
1. The amount on Form 1040, line 47; Form 1040A, line 30; or Form 1040NR, line 45, is less than the credit. If this amount is zero, you cannot take this credit because there is not any tax to reduce. But you may be able to take the additional child tax credit. This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.
2. Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status.
a. Married filing jointly – $110,000.
b. Single, head of household, or qualifying widow(er)
c. Married filing separately – $55,000.
Now if that seems confusing don’t worry. The tax prep software works out the details for you. Just know that it is a credit that should appear on your tax return if you qualify.
So if you’re a parent that meets all of these qualifications, make sure you include all your child’s information on your tax return. It can help lower your taxes and potentially get you a larger tax refund.
For more information about the child tax credit and the additional child tax credit, read IRS Publication 972 on the IRS.gov website.
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