10 facts about claiming the Child Tax Credit

  • April 10, 2012
  • Steve Wisinski, CPA, MAFF

The Child Tax Credit is available to eligible taxpayers with qualifying children under the age of 17. Here are 10 facts that taxpayers should know regarding this beneficial tax credit:

1. 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.

2. Qualification: A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

3. Age test: To qualify, a child must have been under age 17 – age 16 or younger – at the end of the year for which the credit is being claimed.

4. Relationship test: To claim a child for purposes of the Child Tax Credit, the child must 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, even if the adoption is not completed as of the end of the year.

5. Support test: In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

6. Dependent test: You must claim the child as a dependent on your federal tax return.

7. Joint return test: The qualifying child cannot file a joint return for the year.

8. Citizenship test: To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

9. Residence test: The child must have lived with you for more than half of tax year. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

10. 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 by 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 and any alternative minimum tax you owe.

Also, 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.  If you have any questions, or would like more information, please contact a ShindelRock tax professional.