The Child Tax Credit (CTC) is the federal tax credit, which is dedicated to help families offset the overall cost of raising children. Under the present law, the credit is worth up to $1000 per child, provided that he/she is under the age of 17 at the end of each tax year. This amount is subtracted from the total amount of income tax that the family owes to the IRS.
Another thing, which the accountants at A. L. Simon & Associates state about CTC, is that a portion of this credit is refundable but if the credit exceeds the amount of the tax that a certain family owes, then the percentage of the rest of the credit is refunded to the family through a check. This is known as Child Tax Credit. A family can legally receive a refund worth 15% of total earnings of $3000.
Most accountants and tax preparers will tell you that you should have an income of at least $3000 to become eligible for claiming any portion of the tax credit. The refund formula states that a family with one child becomes eligible for CTC if they their income is $9,666, or a family with two children can become eligible if they their income is $16,333 or more. However, the credit begins to phase out once the family reaches an income threshold of $75,000 for an individual and $110,000 for a couple.
Although the families that phase out can claim a portion of the CTC, they will receive a capped amount at 5% of their total income. In order to determine if you are eligible as a recipient, it is inherent that you find a tax professional for child tax credit. A professional tax preparer will advise you to include any foreign income exclusions, when you are determining the amount for your child tax credit.
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) made sure that CTC is available to more families and ensured that the amount is raised from $500 to $1000. The improvement in the policy regarding CTC was made permanent in the American Taxpayer Relief Act of 2012. Moreover, the minimum income that the families must earn in order to become eligible was also reduced by The American Recovery and Reinvestment Tax Act of 2009 (ARRA).
To know whether your child qualifies for CTC, here are some qualities that will help you determine their eligibility.
A child under the age of 17 is eligible to receive child tax credit. He/she must be under the age of 17 by the end of the tax year, for which you are claiming the credit.
The child must be your biological or step-child or a foster child, who is placed with you by an authority agency. An adopted child is treated as your own child if he/she is legally adopted. Our professional accountants at the A. L. Simon & Associates in Libertyville, IL, state that you can also claim your brothers, sisters, stepbrothers, stepsisters and their children for receiving the CTC, if they qualify in all other criteria.
In order to qualify for CTC, a child must not be able to provide for not more than half of his/her own expenses during the tax year.
To claim the tax return, you must claim the child as your own.
The child must be a U.S. national, a U.S. citizen or a U.S. resident alien.
In order for you to claim child tax credit, the child must live with you at least half the year, for which you are claiming tax credit. There are important exceptions to that rule. A child who was born (or died) in the tax year will be considered to have lived with you for an entire year. Other circumstances which state that the child is considered to have lived with you for a whole year are school, juvenile facility, military service, medical care, business, vacation or living with a divorced parent.
If your Modified Adjusted Gross Income (MAGI) exceeds a certain amount, then your CTC is automatically reduced. Your tax preparer can determine the MAGI amount by evaluating your tax filings. The phase out threshold, regarding the child tax credit, is explained below.
The child tax credit is non-refundable and if your credit is more than your tax liability then your tax bill is reduced to zero and any remaining balance is nullified. However, there are special circumstances, where you can file for Additional Child Tax Credit. Find a tax preparer to determine if you are eligible for additional CTC. If you are, you will need to fill the Form 8812 and submit it to the IRS with complete paperwork.
Only one taxpayer can claim one child for the purpose of filing for the CTC or additional CTC. If a child is claimed as a dependant on more than one tax return, authorities at the IRS will determine who will get the claim by evaluating certain rules and regulations.
Don’t miss out on the opportunity to file your claim for child tax credit. Find a tax professional for child tax credit and gather comprehensive knowledge about the matter before making any decision and filing any claims. We have a capable team of friendly accountants who will help you file the right claim.
So what are you waiting for? Click the link below to set up an appointment today or leave a comment below to ask any questions that you might have.
