Child Tax Credit

The child tax credit, allowed by §24, is a credit that may reduce the tax liability of a qualifying individual.  However, unlike the earned income tax credit, the child tax credit does not produce a refund if the credit should exceed the amount of taxes due.

A taxpayer with a qualifying child may take a credit of up to $1,000.00 for each qualifying child.  Also, if the amount of the credit is greater than the amount of tax owed, an “additional child tax credit” may be claimed.

Rules and Requirements

To qualify for the child tax credit:

  1. Taxpayer must have a “qualifying child”; and
  2. Taxpayer’s modified adjusted gross income must be below a certain amount. The amount at which the credit phase-out begins varies depending on the taxpayer’s filing status:
    • Married Filing Jointly – $110,000
    • Married Filing Separately – $55,000
    • All others- $75,000

For years after 2004, there is a uniform definition of a “qualifying child”. MAGI amounts change each year, so consult Publication 17 for the applicable year for further guidance.

The taxpayer’s qualifying child must be:

      1. Under the age of 17 at the end of the tax year
      2. A U.S. citizen, U.S. resident or U.S. national.
      3. Claimed as taxpayer’s dependent
      4. The taxpayer’s:
        • Son or daughter
        • Stepson or Stepdaughter
        • Adopted child – includes a child placed with taxpayer for adoption by an authorized placement agency, even if the adoption is not final. An authorized placement agency includes any person authorized by state law to place children for legal adoption.
        • Grandchild – any descendant of taxpayer’s son, daughter, or adopted child. A grandchild includes taxpayer’s great-grandchild, great-great-grandchild, etc.
        • Eligible foster child:
          • Child must have lived with the taxpayer as a member of the taxpayer’s household for the whole year,
          • Taxpayer must have cared for that child as her own, and
          • Child is taxpayer’s brother, sister, stepbrother, or stepsister; a descendant (including a child or adopted child) of taxpayer’s brother, sister, stepbrother, or stepsister; or a child” placed with taxpayer by an authorized placement agency. This requirement was not included until 2000.
        • Brother or sister
        • Step-brother or step-sister
        • descentdant of any of above individuals, which includes grandchild, niece or nephew
      5. Not have provided more than half of this/her own support.
      6. Single or not joining in a joint return.
      7. A member of taxpayer’s household for more than half of the year.

Resources

Internal Revenue Code

IRC §24: Child Tax Credit

IRS Publications and Forms

IRS Publication 972: Child Tax Credit