Important Qualifications to Claim the Child Tax Credit!

13 February 2012 / Uncategorized / Comments Off on Important Qualifications to Claim the Child Tax Credit!

How to qualify for the Child Tax Credit!

Eligible taxpayers with qualifying children may be able to reduce your federal income tax by up to $1,000 for each qualifying child.  A qualifying child for this credit is someone who meets the following seven tests:

1) Age - A child must have been under age 17 – age 16 or younger – at the end of 2011.

2) Relationship - 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.

3) Support - The child must not have provided more than half of his/her own support.

4) Dependency  - You must claim the child as a dependent on your federal tax return.

5) No Joint Return - The qualifying child cannot file a joint return for the year (or files it only as a claim for refund).

6) Citizenship - To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

7) Residence - The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, such as attending school in a dorm and others.  If you think one of the exceptions applies, we can review them with you.

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.

If you have any questions on this, or any other matters, Widget is here to help!  Please give us a call!