For those of you that didn’t know, there was a $1,000 Child Tax Credit that was developed from the Bush tax cuts. This $1,000 credit was supposed to expire at the end of the 2012 calendar year. However, it has actually been extended!
This is obviously very good news for all of us with children. The reason it got extended was because of the fiscal cliff deal which was signed on January 3, 2103. This gave a 5 year extension to The Child Tax Credit.
The Details of the Child Tax Credit
Some of you might not know what The Child Tax Credit is. It’s simple, it’s offers $1,000 worth of credit per child in your household for tax payers that qualify. Now keep in mind this is only if your child is a dependent and meets certain criteria
For those of you with a lot of children that are dependent on you, the good news is there is no limit to the amount of children you can file for. However, if you do file for a lot of children then you may be subject to the Alternative Minimum Tax (AMT).
How Do You Know If You Can Claim The Child Tax Credit?
Below is a list of bullet points that will help you determine whether or not you might qualify. In order to qualify, the child must:
- Be your own (son or daughter), your step child, adopted child, foster child, your brother or sister, or a descendant of any of these.
- Have been living with you for at least six months
- Not be over the age of 17
- Be dependent on you
- Be a US citizen or registered alien
- Not be older than you
- Not be in a joint venture with anyone else
- Not have provided more than half of their own support
- Be claimed by you
What Are The Income Limitations?
Just like with any other tax break, there are income limitations. They are:
- For married couples filing separately it is $55,000
- Single or widowed it is $75,000
- Married couples that have joint filing it is $110,000
That is not to say that you won’t qualify at all if you are over that amount, but the credit is reduced by $50 for every $1,000 over the amount you are.
Is The Credit Refundable? Is So How Much?
This is often one of the most asked questions when it comes to any tax credit. The answer is the same for this as it is for every other tax credit. If the deductions bring your tax liability to zero, you will not receive a refund. This means you can only hope to break even, you will not be making a profit out of it.
However, if the Child Tax Credit does help you reduce you tax liability to zero, the remaining credit might be returned to you through the Additional Child Tax Credit. It is impossible to say how much of that is refundable because it depends on various factors including how many children you have and your annual income.
If you have one or two children you can receive 15% of your income over $3,000.
If you have 3 or more children you can receive the smaller of the unused amount or 15% of your annual income over $3,000.
Let’s be honest, keeping track of all these crazy IRS rules is not easy and it can get very confusing. That is why TurboTax has decided to keep things simple for you.
All you have to do is fill out the information in the online system and it will make sure you are able to claim every single cent of the Child Tax Credit that you deserve.