NEW YORK (MainStreet) The child tax credit offers could offer big savings for moms and dads just by claiming the deduction on your IRS Form 1040 or 1040A.
Certified Public Accountant groups and the Internal Revenue Service have tips on getting the maximum allowable benefit from it a list every taxpaying parent in America should review:
What you can get. Under the provisions of the Child Tax Credit, parents can slash their federal income tax by up to $1,000 for each qualifying child under the age of 17.
Who qualifies. A qualifying son or daughter must pass six criteria to get the credit: age, relationship, support, dependent status, citizenship and residence.
To get the Child Tax Credit, a child must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these people, including your grandchild, niece or nephew. An adopted child is always treated as your own child.
The "50% rules" To earn the child credit, the son or daughter must not have provided more than half of their own support for the tax year in question. That's probably not an issue with a 16-year-old, but check any income statements your son or daughter may have from a job just in case.
Also, a son or daughter must have lived with a parent for more than half of the tax year in question. For a short list of exceptions, check out IRS Publication 972, Child Tax Credit.
Limits sets. The tax credit has is limited if the parents' modified adjusted gross income is above a certain amount:
- 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. Also, the credit is generally limited by the amount of the income tax owed by the parents, as well as any alternative minimum tax owed.
More tax breaks. 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. Check this IRS review to see if you qualify.