How to Claim the Child Tax Credit

Taxpayers with dependent children can often claim a tax credit on their returns for their dependents. This article explains who is eligible and what criteria must be met.

Things You'll Need

• The Social Security numbers and birthdates of your dependent children

Instructions

1. Several criteria must be met in order to claim the Child Tax Credit. All dependents for this credit must meet the qualifying child rules as outlined by the IRS. The criteria for qualifying children are as follows:

   Relationship--the dependent child must be either a child or stepchild or descendant thereof, foster or adopted child, sibling or step/half sibling or descendant thereof (nieces and nephews are included)
   Residence--the qualifying child must live with you for over half the year, regardless of where you live or whether you pay for or maintain your residence

2. Taxpayers with incomes above certain limits will also have their credits either reduced or eliminated as shown below:

   Single, married filing separately, qualifying widow(er)--$55,000
   Head of household--$75,000
   Married filing jointly--$110,000

   There is an income phaseout schedule that kicks in and reduces the credit by $50 for each full or fractional $1,000 your income exceeds the phaseout floor. Taxpayers with incomes above the schedule are denied the credit.

3. The Child Tax Credit is also considered a nonrefundable credit; that is, any excess credit cannot be paid back to you in cash. For example, if you owe $750 in taxes and receive Child Tax Credit of $1,000, your tax liability will be erased, but the excess $250 will not be paid to you as a refund. Furthermore, the maximum amount of the Child Tax Refund is $2,000 per filer.

4. The Additional Child Tax Credit is available for filers in the following circumstances:

   Filers with less tax liability than the amount of their Child Tax Credit
   Filers with more than two qualifying dependents for the Child Tax Credit
   that have income below $11,750 (for 2007)

5. Filers that fall into either of the previous two categories must complete IRS Form 8812 in order to determine the actual amount of their credit.

Tips & Warnings

• For more information on this subject, see the instructions for the Child Tax Credit on the IRS website at irs.gov (see link below).

• This article is intended to provide a rudimentary introduction to the Child Tax Credit. It is not intended as specific financial or tax advice for any reader, but should only alert the reader as to whether claiming this credit might be possible. For further clarification on this matter, consult your tax advisor.

Resources

• Internal Revenue Service