Claiming the Child Tax Credit

The child tax credit comes into play when there are lots of dependent children in the family or the total income level of the family is lesser than $110K in a year. It is one of the effective means of availing some exemption on tax returns. This is the standard income level that is permitted in the USA. Families that earn more than this amount are not eligible for claiming the child tax credit completely, irrespective of the number of dependent children in the families. The child tax credit reduces the tax liability to a significant level of less than $13,0000. As per Sec. 24 of the U.S.C, the credit diminishes at the rate of 5 cents for every additional dollar earned above the $110,000 yearly income limit.

Though the limit of $110K has been reduced for applicants who are single parents, guardians, and widows are allowed to claim for this credit if their yearly income is lesser than or up to $75,000. People who are married but going through separation or filing individually on their own capacity as parents can avail the benefits of this credit if their incomes are up to $55,000. Though, only one of the divorced parents can avail this benefit and not both of them.

How to Claim the Child Tax Credit
In order to be eligible for this tax credit the applicants will have to submit proof of the following and only then will this tax deduction be brought into action :

• That they are US citizens as well as residents
• That they will still be under 17 years of age, even after the end of the tax year.
• Legal documentation to Prove that the child is related to the applicant. The child can be your own, step child, adopted, minor sibling, niece, nephew, or grandchild.
• Foster children are also included under this scheme, whereby if the child has been placed under the protection of the applicant by the court, then the copy of the original court order will be needed.
• The foster parent will also have to show that the foster child has been residing with the foster family for over half a year i.e. more than 6 months.
• The applicant will have to fill the 'Long Form' or fill the Form 1040 or 1040 A, so as to claim for the child tax credit.

Benefits of This Tax Credit

• As per the Internal Revenue Services (IRS), this credit reduces your tax liabilities by up to $1,000 per child, without having to fear about any tax deductions. This is because unlike tax deduction, this tax credit reduces your tax bill; one dollar at a time and not as a whole.
• Only six basic tests are needed to be passed so as to prove the applicant's details. These details include verification of - Age, Citizenship, Residence, Relationship, Support, and Dependent.
• A test to prove the child's age is below 17 years of age.
• The child cannot and must not have provided for more than half the amount spent on their own support.
• The dependent test must prove that the child is dependent on the applicants federal tax returns.
• You are eligible to claim additional child tax credit only if you can prove that the child tax credit is greater than the total amount of the income tax owned by you.

Additional Child Tax Credit
This refundable tax is applicable for those candidates who did not receive the full amount of the child tax credit, in spite of having a qualified child. This tax will get refunded even if the applicants do not have any tax liabilities. The additional tax is equal to 15% of the earned income amounting to $3,000, that is, in case the total earning does not exceed $3000 then you can avail for the additional taxes as well as social security taxes paid in that year.

In case your income is above these limits then you will have to refer to IRS Publication 972, 'Child Tax Credit' so as to compute the amount you'll be eligible for as well as the modified gross income.