Finance Blog

What You Need to Know About the Child Tax Credit

Written by Eva Rosenberg on January 7, 2014 in Tax  |   No comments

When I was in elementary school, there was a boy in my class whose mother seemed to give birth to a new child practically every year. By the time we were in sixth grade, there were eight children in the family. I didn’t realize it…

2013 tax filingWhen I was in elementary school, there was a boy in my class whose mother seemed to give birth to a new child practically every year. By the time we were in sixth grade, there were eight children in the family. I didn’t realize it then, but looking back I imagine their expenses must have been through the roof.

If you have kids—whether it’s one, two, or eight like my childhood friend’s family—it’s likely that you’re always on the lookout for savings. When it comes time to file 2013 taxes, don’t forget that you can save money with the child tax credit.

What does family size have to do with the child tax credit?

Quite a bit, actually.

There is no limit to the number of children for whom you can claim this particular credit. If you meet all the other criteria, you could conceivably claim up to $1,000 per child for each of your children.

The criteria is as follows:

  • Each child must be under the age of 17 as of December 31 of the tax year.
  • Each child must be your child, stepchild, grandchild, sibling, niece, nephew, or adopted child.
  • You must be providing more than half of the support for the child.
  • You must claim the child as a dependent on your tax return.
  • The child must be a U.S. citizen, resident, or resident alien.
  • The child must have lived with you for more than half the year, unless the child was off at school or meets certain other criteria for absences.

But there’s more: To claim child tax credits, you must have earned income (wages, self-employment income, or non-taxable combat pay) and your income cannot be too high.

How much income is too much to be eligible?

The income requirement changes with inflation and legislation each year. Most recently, these were the modified adjusted gross income (MAGI) limits by filing status:

  • Married filing jointly: $110,000
  • Single, head of household, or qualifying widow/widower: $75,000
  • Married filing separately: $55,000

If your MAGI is too high, your child tax credit starts phasing out, regardless of the number of qualified children you have and support.

That’s the bad news. What’s the good news?

First, there’s an additional child tax credit that is available to families with three or more qualified children and that you can claim if you were ineligible for the full non-refundable child tax credit.

For example, if you only were able to use $300 per child as your child tax credit, you’ll get the extra $700 per child as the additional child tax credit.

Second, these are refundable credits. This means that even if all of your taxes are wiped out or you didn’t pay a dime into the system, the IRS will still issue a check to you for the credit.

If you’re not sure if you or your children qualify for these two credits, the IRS has a nifty tool to help you. Once you’ve figured it out, use IRS Schedule 8812 to claim the credits for which you qualify.

Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.

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