Rules for Claiming the Child Tax Credit
Raising children can be a wonderful experience, but it is expensive. The Child Tax Credit can help by reducing the amount of money you owe Uncle Sam. To claim the Child Tax Credit, you must file your taxes using Internal Revenue Service Form 1040 or 1040A. Claiming the Child Tax Credit does not affect your eligibility, if any, for the Earned Income Credit.
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Description
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The Child Tax Credit provides a reduction in your tax liability of up to $1,000 each for up to three children that you claim as dependents, for a maximum credit of $3,000. The IRS defines the Child Tax Credit as a nonrefundable credit. This means you can only get the credit up to the amount of your tax liability for the year. If you don't have a tax liability, you can't get the credit. There is also an income ceiling. The amount of your Child Tax Credit is gradually reduced once your modified adjusted gross income reaches a threshold of $110,000 if you are married and filing jointly. If you are single, the limit is $75,000 and for those who are married and filing separately, $55,000.
Qualifying Children
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A qualifying child for the purposes of the Child Tax Credit must have resided with you for at least half of the year and you must have provided at least half of the child's support. Children must be U.S. citizens or resident aliens and less than 17 years old as of December 31 of the tax year. You can claim adopted and biological children as well as stepchildren. You may also claim a brother, sister or grandchild. Finally, a child who is a descendant of any of the above may also be a qualifying child (see References 2).
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Reduced Credit
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If your modified adjusted gross income reaches the threshold for your filing status, you don't lose the Child Tax Credit all at once. Instead, the amount of your credit is reduced by $50 for every $1,000 your income exceeds the threshold. Suppose you are single with two qualifying children and make $90,000. That is $15,000 over your threshold, so your $2,000 Child Tax Credit is reduced by 15 times $50, or $750. You still get a credit of $1,250.
Additional Credit
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If you do not have a tax liability equal to or larger than your Child Tax Credit, the amount of the credit is reduced to the amount your tax liability. However, you may be able to get the rest of the credit by filing the Additional Child Tax Credit. You can also claim the Additional Child Tax Credit when you have more than three qualifying children. To claim this credit, you must complete IRS Form 8812 and attach it to your federal tax return. You can download Form 8812 from the IRS website (IRS.gov).
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