Good News For Parents About the Child Tax Credit
How Much Is the Child Tax Credit?
The credit was set to revert to $700 for each qualifying child in 2005, but Congress passed the Working Families Tax Relief Act of 2004 to keep the Child Tax Credit at $1,000 per qualifying child through 2010, as long as you are within the income thresholds for your filing status.
In general, you can't claim a child tax credit that is more than your income tax liability, but in some cases you may be able to claim the difference as a refund. Use Form 8812, Additional Child Tax Credit, to calculate your additional credit.
Who is a Qualifying Child?
The definition of a qualifying child changed in 2005. For purposes of the Child Tax Credit a qualifying child is someone who:
- Is under the age of 17 at the end of the year.
- Is your son, daughter, legally adopted child, grandchild, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of the above.
- Had the same residence as you for more than half of the taxable year, except for absences due to illness, education, business, vacation, or military service.
- Did not provide over half of his or her own support for the year.
If you met the requirements under the old law, but don't meet the new criteria, you may still be able to claim the child as a dependent using the tie-breaker test. For additional explanation see Claiming Dependents.
What If Two Taxpayers Qualify Under the New Test?
If more than one taxpayer qualifies under the new tests, a tie-breaking rule is used (new in 2005). If one of the qualifying taxpayers is the parent, the child is considered to be the qualifying child of the parent. If the parents don't file jointly and both claim the child, the parent that the child resides with for the longest period of time has the first right to claim that child, and if neither parent claims the child, the claimant with the highest adjusted gross income has the right to do so. As of 2005, the support test, which required the taxpayer claiming the child to have paid more than half of the child's support, is no longer used
What Are the Income Thresholds for the Child Tax Credit?
Your child tax credit will start to be reduced when your adjusted gross income is over certain amounts. For the most up-to-date phase-out limits and other details, see IRS Publication 972.
How Do I Claim the Child Tax Credit?
To claim the Child Tax Credit, you must file on form 1040 or 1040A. You can't claim the credit on Form 1040EZ. For more information on how to calculate your credit, see IRS Publication 972 - Child Tax Credit.
