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Money Tips: Answers to Your Child Tax Credit Questions

Money Tips: Answers to Your Child Tax Credit Questions By Cyndi Cohen
Published February 7, 2012
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It has jokingly been said that there is no child so bad that he or she can't be used as an income tax deduction. And in the eyes of the Internal Revenue Service, this is true. Whether your little one is the epitome of the perfect child, well-mannered and mild-tempered, or the class clown, ill-behaved and hyperactive, he or she is a tax deduction all the same. And, although the scores your child might receive in terms of temperament are irrelevant when it comes to taxes, there are certain “tests” that both you and your youngster must pass to qualify for the ever-popular Child Tax Credit.

With a child’s age being the primary factor in determining whether a possible $1,000 is to be gained on Mom and Dad’s tax return, most parents view the Child Tax Credit as one of the less difficult methods of scaling back their tax bill. Making matters even easier, there is generally no extra paperwork associated with claiming kids on your tax return. When preparing your 1040 or 1040A form, you (or your tax preparer) will include the appropriate child credit amount there. If you happen to qualify for what is known as the additional child tax credit, there will be some extra forms to fill out but the benefit will be worth your while.

According to the IRS, there are some important facts associated with the Child Tax Credit that parents should be aware of when filing their return. Read on to learn more about the qualifying factors, benefits, and forms associated with this credit.

  1. Do my child(ren) qualify for the Child Tax Credit?

There is a set of 6 tests that make up the qualifying criteria – if your child meets all 6 then he or she is eligible for the credit. The tests include the following: age, relationship, support, dependent, citizenship, and residence.

  1. How much do we qualify for?

For each child who qualifies for the credit, you may be able to deduct up to $1,000 from your federal income tax.

  1. Do we pass the Age Test?

In order to be eligible for the credit, your child must have been 16 or younger at the end of the tax year (2011).

  1. Do we pass the Relationship Test?

In order to claim a child on your tax return, he or she does not necessarily have to be your biological son or daughter. They may also be a brother, sister, stepchild, stepbrother, stepsister or a descendant of any of these, including your grandchild, niece or nephew. A foster child or adopted child qualifies as well. An adopted child is defined as a child lawfully placed with you for legal adoption and a foster child must be one placed in your foster care by a court or authorized agency.

  1. Do we pass the Support Test?

If a child has provided more than half of his or her own support, the child will not qualify.

  1. Do we pass the Dependent Test?

The child for which you are attempting to claim the Child Tax Credit on your federal return must also be claimed as a dependent.

  1. Do we pass the Citizenship Test?

If your child is a U.S. citizen, U.S. national, or U.S. resident alien, he or she meets the citizenship requirements.

  1. Do we pass the Residence Test?

The child you are claiming must have resided in your home for more than half of the tax year (2011). Some exceptions to this rule do exist, involving temporary absences for special circumstances such as school, vacations, etc. These are outlined in detail in IRS Publication 972, Child Tax Credit.

  1. What are the limitations associated with the Child Tax Credit?

The IRS will take a look at your income and how you are filing to determine how much credit you’ll be receiving for a child. For example, the “phase-out” begins at $110,000 if you are married and filing a joint return. It begins at $55,000 if you are married and filing a separate return, and begins at $75,000 for any other taxpayers.

  1. What is the Additional Child Tax Credit all about and who qualifies?

The Additional Child Tax Credit is intended for those individuals whose owed income tax amount is less than the amount of Child Tax Credit they would be claiming. If this pertains to you, complete details and how to file for this additional credit can again be found in IRS Publication 972, Child Tax Credit.

If you answered ‘yes’ to questions 3-8, then chances are that you and your kids are eligible for the Child Tax Credit. You may want to take a look at item 9 to be sure you are not affected by any limitations that apply to the credit, or read item 10 to determine if you qualify for the Additional Child Tax Credit.

To help you along even further, below is a quick reference guide and links for the various forms associated with the Child Tax Credit.

Good luck and happy filing!

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