Need to Qualify for the Child Tax Credit

What Is the Child Tax Credit?

The Child Tax Credit (CTC) is planned to give an income increase to the parents or guardians of children and other dependents. It only relates to dependents who are younger than 17. The credit is worth up to $2,000 per dependent, but your income level determines exactly much you can get. You need to have earned at least $2,500 to qualify for the CTC. Then it phases out for income above $200,000 for single filers and $400,000 for joint filers. The most you can get is a partial credit if your earned income is above that threshold.

As a reminder, tax credits directly reduce the amount you owe the IRS. So, if your tax bill is $3,000 but you’re qualified for $1,000 in tax credits, your bill is now $2,000. This differs from a tax deduction, which reduces how much of your income is subject to income tax.

The CTC is also refundable up to $1,400. That means if you qualify for the CTC and it brings your tax liability (how much you owe) below zero; the IRS will still send you the remaining amount of the credit, up to $1,400.

Tax Credit

Common home utilities

The Child Tax Credit can appreciably reduce your tax bill. To own the Child Tax Credit you must determine if your child is qualified for it. There are seven eligibility requirements that you should consider: age, family relationship, support, dependent status, citizenship, length of residence, and family income. You and / or your child must meet the seven requirements to claim this tax credit.

How to determine who qualifies

Here is how you can determine which of your children will qualify you for the credit:

  1. Age Requirement  

To be eligible, a child must be under the age of 17 (that is, age 16 or younger) at the end of the tax year for which you are claiming the credit.

  1. Family Bond Requirement

The child must be your own child, stepchild, or foster child in your custody due to a court order or decision of an authorized agency. An adopted child is always treated as your own child. (“Adopted child” includes a child you are catering for by legal adoption, even if that adoption is not final by the end of the tax year. You can also lay claim to your brother / sister or step brother. And you can claim descendants of any of these qualifying persons, such as nephews and grandchildren, if they meet all other requirements.

  1. Child Support Requirement To be eligible, the child cannot have provided more than half of his or her own financial support during the tax year.
  2. Dependent requirement

you must lay claim to the child as a dependent on your own tax return. Bear in mind that, in order for you to claim a child as a dependent, this must meet the following conditions: 1) be your child (or adoptive or foster child), brother / sister, nephew / a or grandchild; 2) be under the age of 19 (or under the age of 24 and a full-time student for at least five months of the year) or a lasting disability, regardless of age; 3) have lived with you for more than half the year and 4) have not provided more than half of their own financial support during the year.

  1. Citizenship Requirement

The child must be a citizen of the United States, native, or foreign resident. USA (For tax purposes, the term “US native” refers to persons born in American Samoa or the Commonwealth of the Northern Mariana Islands.)

  1. Residency requirement

the child must have lived with you for more than half of the fiscal year for which you claim the credit. However, there are some significant exceptions: A child who was born (or died) during the fiscal year is considered to have lived with you all year. Your child’s temporary absences due to special situations, such as school or university, vacations, business, medical care, military services or detention in a youth center, are measured as the time that your child lived with you. (There are also some exceptions to the residency requirement for children of divorced or separated parents.) For detailed information, see the instructions for Form 1040, lines 51 and 6c).

  1. Family Income Requirement

The Child Tax Credit is reduced if your Modified Adjusted Gross Income (MAGI) goes beyond certain amounts, which are determined by your marital status for the purposes of filing your tax return. In 2017, the income threshold for phasing out is $ 55,000 for married couples filing separately, $ 75,000 for qualified widowed singles, heads of households, and taxpayers, and $ 110,000 for married couples filing jointly. For every $ 1,000 of income above the threshold, your available child tax credit is reduced by $ 50. Starting in 2018, the phase out of the credit begins with $ 200,000 of income ($ 400,000 for married filing jointly).

What happens if the credit exceeds my responsibility?

For tax years prior to 2018:

The Child Tax Credit is non-refundable; if the credit goes beyond your tax debt, your tax bill drops to zero and all remaining unused credit is lost. However, you may be able to claim an additional child tax credit that is refundable for the unused balance. To find out if you’re qualified for this refundable credit, complete the worksheet on IRS Form 8812.

As of 2018:

The new Child Tax Credit is capped at $ 2,000 per qualifying child, with a refundable amount of up to $ 1,400 per qualifying child. Gradual removal of credit begins at $ 200,000 ($ 400,000 for joint taxpayers filing).ARTICLE

The Additional Child Tax Credit (ACTC)

Prior to the new tax law made the child tax credit refundable, some files were qualified for the Additional Child Tax Credit (ACTC). This credit effectively gave you a refund if the CTC reduced your tax bill to less than zero. The ACTC is largely is phased out for 2018 but if you need to file a return for a previous tax year, you can find information for the ACTC on the Form 1040.