What is Child Tax Credit?

Question: What is Child Tax Credit?

Answer: The Child Tax credit is for people who have a qualifying child. It can be claimed in addition to the Credit for Child and Dependent Care expenses.  The maxiimum Child Tax Credit is $1,000 is it is refundable tax credit.

In order to receive the Child Tax Credit, you must be meet 7 qualifying tests to qualify: age, relationship, support, dependent status, citizenship, length of residency and family income. You and/or your child must pass all seven to claim the Child Tax Credit.

  1. Age Test – To qualify, a child must have been under age 17 (age 16 or younger)

  2. 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.
  3. Support Test – In order to claim a child for this credit, the child must not have provided more than half of their own support.

  4. Dependent Test – You must claim the child as a dependent on your federal tax return.

  5. Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

  6. Residence Test – The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

  7. 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.

    Maximum 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 the age of 17.

    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, meaning the credit is partially refundable.

Please note: Child Care Tax Credit is different from Child Tax Credit.

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