Posted by Rosovich & Associates, Inc.

Child and Dependent Tax Credit: What is it and How to Qualify?

Child and Dependent Tax Credit: What is it and How to Qualify?

The child tax credit is a credit that can give you up to $2,000 for each qualifying child while a qualifying dependent gets $500. It is a refundable tax credit that diminishes when the AGI gets to $200,000 for single filers and $400,000 for married couples.

If you want to legally reduce your tax bill, the child tax credit is one of the most effective ways. 


The Child Tax Credit: What you get for each kid

  • For dependent kids 16 or younger, when the calendar year ends, you can get up to $2,000 with the Child Tax Credit. 

  • Dependents that qualify, other than your kids,  also gives you $500 nonrefundable credit.

  • With this, the child tax credit brings down your tax credit using a dollar-for-dollar basis. The credit can bring your tax bill to zero since as much as $1,400 of the CTC is refundable. There is also a provision for a refund on whatever is left. 


Qualifying for Child Tax Credit

The only criteria for you to access the full benefit of the credit are if your modified AGI is less than:

  • $400,000 dollars for a married couple doing joint filing

  • $200,000 dollars for other people

There are other eligibility criteria for the Child Tax Credit. A couple of these are:

  • The responsibility of the kid's care for the previous year should come from you, at least half. Half of the year, the kid should be under your roof. 

  • By the end of the calendar year, the kid must be 16 or below.


Understanding what the Child and Dependent Care Tax Credit is

With the Child and Dependent Care Credit, there is the opportunity to get as much as 35%, which can amount to 35% of child expenses and other care costs for a child less than 13. This also applies to other dependents, a disabled parent or spouse, to give you the provision to work. 

  • The higher your income level, the lower the portion of the expenses you can deduct. This also reduces the value of the credit even though it does not entirely cancel it.

  • The credit cannot be refunded. As a result, you will not get a refund from what is left of the credit even though your tax bill can be reduced entirely to zero. 

  • Some states have their own version of the CTC. They offer a percentage of the credit from the federal level. There are states that, however, expand their eligibility or adjust their threshold and provide other incentives.


Ways to Qualify for this Credit 

  • For the dependent Child, they must be 12 or less during the child care period.

  • There is no age requirement for other dependents like spouses and parents. Uncle Sam, however, specifies that such folks must be physically incapable of taking care of themselves. They must also be under your roof for half of the year. 

  • There should be earned income. This is money you get from a job. This does not include dividend income and investments. 

  • You should supply the name, address, and TIN of the care provider. The TIN could be an Employer Identification Number or a Social Security Number. 

Some Care providers disqualify you from claiming the credit. This holds if the care provider is:

  • Your spouse

  • A dependent that reflects on your tax return

  • Your kid is 18 or below, even if they do not reflect on your return as a dependent. 

  • The dependent's Child's parent


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