Happy Tax Season Series: The Child Tax Credit

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February 15, 2012 by msquaredlaw

The Child Tax Credit is available to eligible taxpayers with “qualifying children” under age 17.   This Child Tax Credit is in addition to the credit for child and dependent care expenses and the Earned Income Tax Credit.  The following are some important facts and rules relating to the Child Tax Credit:

  • 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 age 17.
  • Qualification.   A “qualifying child” for this credit is someone who meets the qualifying criteria of the following seven tests: age, relationship, support, dependent, joint return, citizenship and residence.
  1. Age test.   To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.
  2. Relationship test.   To claim a child for purposes of the Child Tax Credit, the child must 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.
  3. Support test.   In order to claim a child for this credit, the child must not have provided more than half of his/her own support.
  4. Dependent test.   You must claim the child as a dependent on your federal tax return.
  5. Joint return test.   The qualifying child can not file a joint return for the year (or files it only as a claim for refund).
  6. Citizenship test.   To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.  There is an exception to this rule for adopted children.  If you are a U.S. citizen or U.S. national and your adopted child lived with you all year as a member of your household in 2011, that child meets the citizenship test.
  7. Residence test.   The child must have lived with you for more than half of 2011.  There are some exceptions to this residence test which are too detailed to discuss here.
  • 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 by 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 and 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.  This Additional Child Tax Credit may give you a refund even if you do not owe any tax.

For more information contact us or see IRS Publication 972, Child Tax Credit.   You can also use the Interactive Tax Assistant to determine if you’re eligible for the Child Tax Credit.   The Interactive Tax Assistant will ask you a series of questions and provide you with responses.

Muiños & Morales

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