Facts About the Child Tax Credit

Those with children know that those little bundles of joy are expensive. Fortunately, they can also help you earn deductions and tax credits come tax time. The Child Tax Credit is one of the many examples of tax benefits that are available to families with young children. To determine whether your family can take the child tax credit, speak with the tax professionals at The Accounting and Tax Company. We know the ins and outs of this credit and many others, and we would love to share the information with you.

Who is a Qualifying Child for the Child Tax Credit?

Each qualifying child is “worth” up to a $1,000 tax credit. In order to be a qualifying child, the child must meet certain requirements.

• The child must be your son, daughter, stepchild or foster child. He or she could also be a sister, brother, stepbrother, or stepsister. It also extends to half siblings. A qualifying child could also be a descendant of any of these individuals, such as a niece or a nephew. It is important to note that an adopted child is always considered your own son or daughter for tax purposes.
• The child must have been under 17 at the end of the tax year.
• The child should be supported by you. That is, the child cannot provide over half of their own support.
• The child should also have lived with you for more than half of the tax year to be a qualifying child. If you or the child were away for vacation, business, medical care, military service, or juvenile detention, or school, then you may still be able to qualify for the half of the year requirement. This requirement is somewhat flexible in those situations.
• You must claim the child as a dependent on your return in order to get the credit.
• The child that you claim cannot also file a joint return. There are a couple of exceptions this rule, so talk to your tax preparer for more information.
• The child must also be a U.S. citizen, national, or resident alien. This requirement can be tricky too, so speak with your tax professional if you have questions about this obligation.

Limitations to the Child Tax Credit

There are two limitations to the child tax credit, even if you have a qualifying child as laid out above. First, the credit will be less if you make higher than a certain amount of money per year. For those married filing jointly, if your adjusted gross income is over $110,000, then you may have a reduced credit. Your credit may also be reduced if you are single, head of household, or a qualifying widower, and you make over $75,000 per year. Lastly, if you file married filing separately, then your credit will be reduced if you make over $55,000 per year.
 The other limitation is that this credit is not refundable. It can only be used to offset taxes owed. That means that if you other deductions and credits take away your tax obligation, then this credit will be no benefit to you because you do not owe any taxes. You may still be able to claim the Additional Child Tax Credit, which is discussed below.

Claiming the Child Tax Credit

You must use the “long form” 1040 to claim the Child Tax Credit. The credit information is not available on Form 1040EZ. You must provide the name, birth date, and Social Security number for each child that you want to use to take this credit. If the child does not have a Social Security number, then you must use an Individual Tax Identification Number (ITIN) for the child.
 You must apply for an ITIN for your child before the filing deadline in order to claim the Child Tax Credit. Your tax preparer can help you prepare the documentation and forms that you need to file for an ITIN for your child.

The Additional Child Tax Credit

If you do not have a tax obligation to offset, then you may still be able to use the Additional Child Tax Credit to get some portion of the credit refunded to you. However, you are only eligible for the additional child tax credit if you have three or more qualifying children. You must also have more than $3,000 in earned income to qualify.
 The regular requirements under the Child Tax Credit also apply to the Additional Child Tax Credit. That means that if you do not qualify for the Child Tax Credit, then you will also be ineligible for the Additional Child Tax Credit.

Getting Tax Help with the Child Tax Credit

It is sometimes difficult to decide if your child will qualify for the Child Tax Credit. The Accounting and Tax Company can help! Find out more by clicking the profile link below or use the Contact button to get started.