Child Tax Credit

Child Tax Credit

Revisions and Adjustments

The Child Tax Credit is applicable to taxpayers who have a dependent or dependents that is or are living with the taxpayer. The said dependent should be below 17 years of age by the end of the tax year.

Child Tax Qualifications

There are qualifications and requirements that should be met and submitted before the taxpayer can claim it. There are separate requirements for the child, the taxpayer should meet the qualifications and the credit limit should also be taken into consideration. The rules in dependency exemption also apply in the CTC. The taxpayer who is qualified to claim the CTC should also follow the same rules. The only difference is that the child should be below 17 years old before December 31 of the current year and the child can be the taxpayer’s own child, adopted child, foster child, stepchild, brother or sister, stepbrother or stepsister or even the taxpayer’s own grandchild. The child must be living with the taxpayer for more than 6 months and the child should not be self-supporting. Most importantly, the child should also be a resident or a citizen of the United States.

As for the credit limit, the taxpayer could claim $1,000 per child as stated under the regulations of the new CTC. It also depends on the tax liability, filing status and the taxpayer’s modified adjusted gross income. If the taxpayer is single and has a modified adjusted gross income that reaches $75,000, the CTC is automatically void. If the taxpayer is married, the taxpayer and the spouse could file for either a joint or separate income tax. For joint filers, the CTC is cancelled if the modified adjusted gross income exceeds $110,000. As for separate filers, if their modified gross income reaches $55,000, the CTC is also cancelled.

In cases where the credit is greater than the liability, the taxpayer can get a refund and this is known as “additional” Child Tax Credit or ACTC.

The Recovery Act

This act revises the qualifications for the CTC. It broadens the scope of eligibility by decreasing the minimum income bracket of the taxpayer from $12,550 to $3,000 so that more taxpayers can claim their CTC.

Other Option for Those Who Are Not Qualified for CTC

If the taxpayer is not qualified to get the CTC, then the taxpayer can apply for ACTC. This enables the taxpayer to decrease his tax liability. When this happens, the taxpayer can even get a refund. To be able to qualify for the ACTC, the taxpayer should meet the requirements of the regular CTC, the tax liability should be less than the allowed CTC, and the taxpayer should have an income of more than $11,750.

For the computation and additional limitations under the ACTC, you can read the IRS publication 972.

CTC is a good way to lessen your tax and even get a refund. All you have to do is to qualify for the CTC and submit all the requirements. This way, you could save money and put it to better use.

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Posted by tax assistant on Wednesday, December 1st, 2010. Filed under Personal Tax Issues, Tax Deductions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry