Raising children is not cheap. However, the IRS understands this, which is why they have various credits and deductions for taxpayers that have families. One of these valuable tax credits is the Child Tax Credit and today we are sharing with you some of the important things that you should know about it.
The child tax credit explained
This is one of the nonrefundable credits that can be worth as much as $1,000 for children who are under 17 years of age. Since it is a credit, it reduces your tax bill by the dollar. However, keep in mind that if your tax liability is less than the amount of the credit that you receive it cannot be credited as a refund.
Who qualifies for this tax credit?
In order to claim this valuable credit you have to meet the requirements below:
1. Your child is under the age of 17 at the end of the year and is a U.S. citizen
2. You claim the child as a dependent
3. You provide the child more than half of their support
4. Your child doesnot file a joint return
5. Your child has lived with you for more than half of the year (this includes children who died or were born during the current year)
For tax purposes, the IRS also considers stepchildren, siblings, foster children, and descendants of any of them to be children.
Handling children who live with other parents, but you claim the dependent exemption
In the event that the child doesnot live with you, but you are claiming them as a dependent you are able to claim the Child Tax Credit. However, you must use Form 8332 and it has to be signed by the parent that the child resides with.
Higher income and claiming the child tax credit
As your income increases the Child Tax Credit phases out just like any other tax credit. You will receive less if your AGI is over $75k ($110k for joint filers, $55k for those who file separately).
Differences between the child tax credit and the child and dependent care credit
The Child and Dependent Care Credit is for those who have to pay for their dependent to be cared for while they work. It is to encourage parents to work without having to worry too much about their finances. However, with the Child Tax Credit even parents who donot have to pay for childcare will be able to benefit from it.
The additional child tax credit explained
If your income is low, you may be able to get some money in the form of a refund with the CashLendupFast.com. In order to claim this credit you must have made more than $3,000.
For those with one or two children, the credit could be as much as 15% of your income over $3,000. If you have more than three children the credit will be either 15% of your income over $3,000 or the total amount of your social security and Medicare taxes paid minus the Earned Income Credit.
If this sounds complicated, consider filing with a software such as TurboTax, which will do all of the complicated math for you.
Claiming the credits
In order to qualify for either of the credits you have to file Form 1040 or Form 1040A. Despite not being able to file Form 1040EZ, the benefits are worth the extra time.
If you file with TurboTax, they will ask you a few simple questions to ensure that you get all of the credits you qualify for, which results in your maximizing your refund this tax season.