The Child Tax Credit may save you money at tax-time if you have a qualified child. Here are the top things you should know about the credit.
- Amount. The Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child that you are eligible to claim on your tax return. The Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
- Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.
- Qualifications. For this credit, a qualifying child must pass several tests:
- Age test. The child must have been under age 17 at the end of 2014.
- Relationship test. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support test. The child must not have provided more than half of their own support for the year.
- Dependent test. The child must be a dependent that you claim on your federal tax return.
- Joint return test. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
- Citizenship test. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Residence test. In most cases, the child must have lived with you for more than half of 2014.
- Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income. 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.
At Gurian CPA Firm, we can answer questions you have about qualifying dependents to take advantage of possible tax credits. Contact us today for an appointment!
