The Child Tax Credit
The Child Tax Credit is intended to offset the extra cost it takes to raise children and can be worth as much as $1,000 per child. For Tax Year 2011, the Child Tax Credit is at least partially refundable to taxpayers who had an earned income of more than $3,000 for the year (see the Additional Child Tax Credit).
The Child Tax Credit begins to phase out at adjusted gross incomes of $75,000 for single filers (and heads-of-household), $110,000 if married filing jointly, and $55,000 if married filing separately. When figuring your income for the purposes of the Child Tax Credit, you must include any foreign income exclusions.
The maximum amount of the Child Tax Credit is currently scheduled to drop to $500 per child in 2013.
Claiming the Child Tax Credit:
During the efile.com online tax interview you will be prompted to enter the necessary information. The necessary forms will be generated for you based on your answers.
For more details about the Child Tax Credit, see Publication 972, Child Tax Credit.
The following tests must be satisfied in order to claim a dependent as a qualifying child for the purposes of the Child Tax Credit:
Age Test:
The child must have been 16 or younger on December 31.
Citizenship Test:
The child must be a United States citizen, a United States national, or a resident alien.
Dependent Test:
The child must be claimed as a dependent on your tax return.
Relationship Test:
The child must be related to you in one of the following ways: son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, grandchild, niece, or nephew. This includes any legally adopted child, any child lawfully placed with you in preparation for adoption, and any foster child lawfully placed in your care.
Residency Test:
The child must have lived with you for more than half of the year (stayed with you for at least 183 nights). Temporary absences for special circumstances are generally acceptable, and special rules may apply if you are divorced or for certain other circumstances. For more details, please see Publication 972, Child Tax Credit.
Support Test:
The child must NOT have provided more than half of his or her own financial support for the year.
Additional Child Tax Credit
The Additional Child Tax Credit (ACTC) is a refundable credit that you may receive if your Child Tax Credit is greater than the total amount of income taxes you owe, as long as you had an earned income of at least $3,000.
Form 8812, Additional Child Tax Credit, is used to figure out if you qualify for the credit and to calculate the amount of the credit you will receive. The eFile tax software will do all required math and generate the form for you.
Child Claimed as a Dependent by More than One Person
Only one taxpayer (or married couple filing jointly) may claim any one child for the purposes of the Child Tax Credit and the Additional Child Tax Credit. If a child is claimed as a dependent on more than one tax return, the IRS will determine who gets the claim according to a set of tiebreaker rules.
Learn what happens when a child is claimed by more than one person as a dependent.
Other Child-Related Tax Savings:
Exemptions: You will be able to claim a standard exemption for each qualifying child.
Child Care Credit: You may be able to deduct up to $3,000 for one dependent, or up to $6,000 for more than one dependent with the Child and Dependent Care Tax Credit.
Adoption Credit: If you adopted a child, or if you are in the process of adopting a child, you may qualify for the Adoption Tax Credit.
Filing Status: If you are unmarried and your child lived with you for more than half of the year, you may qualify for a higher standard deduction and lower tax rates by filing as Head-of-Household.
For more information on the Child Tax Credit, please consult Publication 972 - Child Tax Credit.
See what other tax credits and tax deductions you may qualify for.