The Child Tax Credit is a valuable credit that can significantly reduce your tax liability. The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. The Child and Dependent Care Tax Credit provides a credit of between 20 percent and 35 percent of up to $3,000 ($6,000 for two or more children) of childcare expenses for children under age 13 whose parents work or go to school. Families with income below $15,000 qualify for the 35 percent credit. That rate falls by 1 percentage point for each additional $2,000 of income (or part thereof) until it reaches 20 percent for families with income of $43,000 or more.
Here are 10 important facts from the IRS about this credit and how it may benefit your family.
- Amount – With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
- Qualification – A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
- Age Test – To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2009.
- Relationship Test – To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support Test – In order to claim a child for this credit, the child must not have provided more than half of their own support.
- Dependent Test – You must claim the child as a dependent on your federal tax return.
- Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence Test – The child must have lived with you for more than half of 2009. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
- Limitations – The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending 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. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
- Additional Child tax Credit – If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.
Claiming the Child Tax Credit 10 Quick Facts
For more information, see IRS Publication 972, Child Tax Credit, available below or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Links on Claiming Child Tax Credit:
- Form 1040A, U. S. Individual Income Tax Return
- Form 1040A Instructions
Form 1040, U.S. Individual Income Tax Return
Form 1040 Instructions