Hertsel Shadian, Attorney at Law, LLC

Ten Important Facts about the Child Tax Credit

15 February 2011

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon a taxpayer’s income. Here are 10 important facts about this credit and how it may benefit a taxpayer’s family.

  1. Amount – With the Child Tax Credit, a taxpayer may be able to reduce his or her federal income tax by up to $1,000 for each qualifying child under the age of 17.
  2. Qualification – A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
  3. Age Test – To qualify, a child must have been under age 17—age 16 or younger—at the end of 2010.
  4. Relationship Test – To claim a child for purposes of the Child Tax Credit, the child must either be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes a taxpayer’s grandchild, niece or nephew. An adopted child always is treated as a taxpayer’s own child. An adopted child includes a child lawfully placed with a taxpayer for legal adoption.
  5. Support Test – In order to claim a child for this credit, the child must not have provided more than half of his or her own support.
  6. Dependent Test – A taxpayer must claim the child as a dependent on the taxpayer’s federal tax return.
  7. Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  8. Residence Test – The child must have lived with the taxpayer for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  9. Limitations – The credit is limited if a taxpayer’s modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on the taxpayer’s filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, the phase-out 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 the taxpayer owes as well as any alternative minimum tax the taxpayer owes.
  10. Additional Child Tax Credit – If the amount of the taxpayer’s Child Tax Credit is greater than the amount of income tax a taxpayer owes, the taxpayer may be able to claim the Additional Child Tax Credit. The credit is claimed on IRS Form 8812, Additional Child Tax Credit.

For information about the Child Tax Credit, contact your professional tax advisor or tax preparer, or see the official IRS website at www.IRS.gov. Also, see the prior article, “Ten Tax Topics for Taxpayers with Children,” for additional information about tax benefits generally available to taxpayers with children. Please also feel free to share this article with other individuals that might benefit from this information.