Parenthood can be an incredibly rewarding experience. But it also comes with lots of expected – and unexpected – expenses. Fortunately, the IRS offers some helpful tax-saving moves for moms and dads in search of any financial relief they can get. The Child Tax Credit is one such tax break.
In Part 1 of 5 in our #TaxCreditCollection Series, we examine the Child Tax Credit, how much it is worth, and who may claim this valuable credit.
How Much Is The Child Tax Credit Worth?
The Child Tax Credit is a tax break designed to provide some much-needed tax relief to parents of one or more children in specific income brackets.
As of tax year 2016, this dollar-for-dollar credit is worth up to $1,000 per qualifying child. It can only be used by parents who claim a child as a dependent on their personal income tax return. In addition, you can only claim the credit if you have one or more qualifying children.
Keep in mind that the Child Tax Credit may be claimed in addition to the Child and Dependent Care Credit. Plus, if the amount of your Child Tax Credit exceeds the amount of income tax you owe, you may be eligible for the Additional Child Tax Credit.
What Is A Qualifying Child?
For eligibility to claim the Child Tax Credit, you must have a qualifying child. The following 6 factors are involved in determining who is a qualifying child:
- Age: A child must be age 16 or younger at the end of the year for which the credit is claimed.
- Relationship: A child must be your son, daughter, stepchild, foster child, adopted child, brother, sister, stepbrother, stepsister, or the descendant of one of these relatives, which can include a niece, nephew, or grandchild.
- Support: A child must not have provided more than half of their own support within the tax year for which you claim the credit.
- Dependent status: A child must be claimed as a dependent on your personal federal income tax return.
- Citizenship: A child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence: A child must have lived with you for at least half of the year for which you claim the credit.
Who Can Claim The Child Tax Credit?
In terms of income that taxpayers earn, there are some limitations on how much money you can make every year to be eligible for the Child Tax Credit. Married joint filers can earn up to $110,000 in modified adjusted gross income (MAGI) before the credit starts to be phased out. Married couples who file separate tax returns can make up to $55,000 per spouse before this phase-out occurs. As for single, head-of-household, and widow(er) filers, they can make no more than $75,000 annually prior to the credit’s phase-out.
It’s also worth noting that for each $1,000 of income above one of these thresholds, the available amount of the credit is reduced by $50.
Discover more IRS tax credits that can help reduce your tax bill from Uncle Sam by working with the accounting professionals at 1-800Accountant. Learn more by calling 1-800-222-6868 or by visiting www.1-800Accountant.