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Child Tax Credit

 

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The Child Tax Credit is a credit worth up to $1,000 for each qualifying child at the end of the year. If you have 4 children, the credit can cut your taxes by up to $4,000. Remember, a credit offsets your taxes dollar for dollar. A child must meet 5 criteria for you to receive child-related benefits.

The child must:

be your son, daughter, stepchild, foster child, brother, sister or a descendant of any of them
must be younger than 17
could not have provided more than half of his or her own support
must live with you more than half the year
must be a U.S. citizen, U.S. national or resident of the U.S.


Once modified adjusted gross income (MAGI) exceeds $110,000 if Married Filing Jointly, $55,000 if Married Filing Separately and $75,000 for any other filing status, the credit amount decreases by $50 for every $1,000 or fraction of $1,000 that it exceeds the limit.

If your credit is limited by your taxes and your earned income is more than $11,750, you may be eligible for additional Child Tax Credit. You also may be eligible for this credit if you have at least 3 eligible children and the Social Security and Medicare taxes you paid are more than your Earned Income Credit.

Child Tax Credit for Individuals with Higher Incomes
The Credit is available regardless of your filing status. However, your credit is reduced if your modified adjusted gross income (MAGI) is more than:

$110,000 if Married Filing Jointly
$75,000 if Single, Head of Household or Qualifying Widow(er)
$55,000 if Married Filing Separately

For every $1,000 (or fraction of $1,000) your MAGI exceeds the trigger point, you lose $50 of credit.

For example, if you file a joint return and your MAGI is $115,000, the extra $5,000 exceeding the limit would reduce your credit by $250. So if you have only 1 dependent child in 2007, your credit would be $750. If you have 2 children who qualify, then, your credit would be $1,750 ($2,000 minus $250).

Additional Child Tax Credit
The Child Tax Credit can't reduce your taxes below zero. However, if your Credit is limited by your taxes, you may be eligible for the additional Child Credit, even if your tax liability is zero. You may be eligible if:

your taxable earned income is more than $11,300
you have 3 or more eligible children and the Social Security and Medicare taxes you paid are more than your Earned Income Credit

If you qualify, you'll need to file Form 8812.

 

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