Do You Qualify for the Child Tax Credit?

Children are one of the greatest gifts in this world and can make us feel complete. However, they sure can be expensive! Between diapers and field trips, hospital bills and Christmas presents, there’s very little money to go around when all is said and done. Luckily, Uncle Sam understand just how much it can weigh on parents, and so they offer something called the child tax credit. If you’re wondering if you qualify or what it takes to qualify, you’re in luck. In this article, we’ll be taking a look at the particulars of the child tax credit. Of course, we recommend that you Find a Tax Professional for Child Tax Credit to ensure that you maximize your returns and minimize your tax liability. At the end of this article, we here at TH Tax Services will provide some more information to help you get started on the right path.

What’s the Child Tax Credit?

So, without further ado: what is the child  tax credit? Essentially, for every child that meets the conditions set out by the Internal Revenue Service (see below), you may be eligible to receive a tax credit of up to $1,000 per child on your 2015 tax return.This is a dollar for dollar credit, not a deduction: the critical distinction is that deductions reduce the amount of taxable income, whereas a tax credit goes beyond that and reduces your overall liability. Depending on how you file and the amount of dependents, you may actually be eligible for a tax rebate check.

There’s another important distinction: the child tax credit does not affect the exemption deductions you take for your dependent children; the child tax credit is in addition to whatever deductions you’re eligible. So, you can save even more! Hard to argue with those terms, no?

Nevertheless, your credit can be cut back if your income can be cut back if your income exceed certain levels (more on that later in this article)

Does My Child Qualify?

While these benefits sound good, what does it take for my child to qualify? Ultimately, it come down to six criteria: age, citizenship, dependency, relationship, residency. and support. Let’s look into the particulars required of each:

• Age: At the end of the calendar year, your child must have been under 17 years old (age 16 or younger).
• Citizenship: Your child must be a U.S. citizen, U.S. national, or U.S. resident alien. 
• Dependency: You must claim the child as a dependent on your federal tax return. 
• Relationship: Your child must be either your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals (grandchild, niece or nephew). Adopted children are equivalent in status to your biological children. Adopted children include children lawfully placed with you for legal adoption. 
• Residency: The child must have lived with you for more than half of the year. Exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit. 
• Support: Your child must not have provided more than fifty-percent of their own support. 

In addition to these criteria, you are required to report each qualifying child's Tax Identification Number (TIN) on your return. The TIN is most often the child's Social Security Number.If you are wondering if your children qualify, the best course of action is to Find A Tax Preparer that understands the specific circumstances of your situation. There can be a considerable amount of grey area associated with your circumstance, so it’s best to consult a professional.

Withholdings

One of the more overlooked reimbursements for your children that you may have missed is that is on a form that most people consider to be an after-thought. Which one is it? It is the Form W-4.
 That’s right. If you’ve wondered how waiting a year for a child tax credit may be too long, your paycheck’s withholdings on your W-4 may be the key to saving money throughout the year. Does this situation sound familiar to you: when you file your taxes each year, you either a) receive a substantial amount on your tax refund, or b) you receive a shockingly large amount due of tax liability. The reason for this is that your withholdings—the money you choose or not choose to pay in taxes—is actually just your own personal estimates on your actual tax responsibility. This is one area that is beyond the scope of this article, but adjusting the amount due to you is a balancing act. This is one of the reasons why recommend that you adjust your W-4 with your employer, or consult a qualified Accountant to balance your return throughout the year.

Additional Child Tax Credit

While these child tax credits may seem attractive, some people are subject to a threshold with the amount of child tax credits that you are able to receive. Essentially, if your total credits are larger than your tax liability, the tax bill that you’ll owe is reduced to zero. The remaining credit is usually lost.
 However, there’re exceptions to this rule. If the amount of income that you make throughout the year is low enough and the tax bill has been reduced to zero, a refund may be available to you in the amount of the remaining balance. Aptly named, this is called the additional child tax credit.
 How do you know if your family qualifies? There’s a little bit of math involved. According to the IRS, your family may be eligible for a refund of up to 15% of your earned income in excess of $3,000 if you a) have three or more children, and b) paid Social Security taxes that were in excess of your earned income credit.
 Again, this isn’t a simple qualification as some restrictions to do apply. This is why we emphasize that to know the extent of your true savings, consulting a Tax Preparer is always a smart choice.

Limits to the Child Tax Credit

As we mentioned before, the IRS doesn’t exactly give out free money to the undeserving. If your modified adjusted gross income (MAGI, for short) is above a certain amount, you do not qualify. This is dependent 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. 

Generally, the amount that is due to you is limited by the amount of owed income tax and any alternative minimum tax you owe.