Claiming Child Tax Credit

Taxpayers claiming child tax credit may be eligible to deduct up to $1,000 per qualifying child. Depending on a taxpayers income, marital and filing status, the government may allow a sizeable deduction for each eligible dependent under the age of 17 at the end of the year. To qualify, in addition to being under age 17, children must be related to the taxpayer by birth or marriage, by adoption, or as a foster child of qualifying parents. Not only do sons, daughters, and foster kids qualify, but taxpayers brothers, sisters, stepbrothers, stepsisters, or their descendents can also be claimed. Parents with dependent nieces and nephews; blended families raising stepchildren, or older adults, up to a certain age, who rear grandchildren may all benefit by claiming child tax credit. Qualifying dependents must be citizens, nationals or residents of the United States and must have resided in the taxpayer's home for at least six months out of the year. In addition, children who qualify must receive over half of all monetary support from the taxpayer claiming a deduction.

In today's economy, raising children can blow anybody's budget. Parents, grandparents, and foster parents not only shoulder the hefty responsibility of paying for education, food, clothing, and housing; but children also need quality healthcare, dental care and insurance. Most families depend on two incomes just to meet monthly household expenses; and paying for daycare while Mommy works has become the norm rather than the exception. While many advocate families having fewer children, the Bible views childbearing in an entirely different light. "Lo, children area an heritage of the Lord: and the fruit of the womb is his reward. As arrows are in the hand of a mighty man; so are children of the youth. Happy is the man that hath his quiver full of them: they shall not be ashamed, but they shall speak with the enemies in the gate" (Psalms 127:3-5). Thanks to the federal government's Child Tax Credit (CTC), families with single or multiple dependents can reduce the amount of taxes owed or qualify for a refund. While the CTC was legislated to give predominantly low- to middle-income families claiming child tax credit a break; the deduction is limited by their modified adjusted gross income (AGI). The AGI for married couples filing jointly cannot exceed $110,000. If couples decide to file separately, neither spouse's income can exceed $55,000. Other qualifying taxpayer AGIs are limited to $75,000.

Taxpayers claiming Child Tax Credit greater than the amount of tax owed may claim the difference as an Additional Child Tax Credit; however the total amount of deductions claimed for the CTC and Additional CTC cannot exceed a maximum amount, usually $1,500. Taxpayers with qualifying children use Form 1040 or 1040A when claiming deductions. For detailed information on computing and filing, taxpayers may log onto the Internal Revenue Website at IRS.gov or call 800-TAX-FORM. Publication 972, a lengthy 17-page document, explains qualifications and instructions for filing in detail. More abbreviated instructional brochures can also be downloaded from the IRS website.

Another legislation designed to help low-income employed taxpayers is the Earned Income Tax Credit (EITC). Originally approved by Congress in 1975, this credit was designed to help alleviate Social Security tax burdens and offer low income individuals an incentive to seek gainful employment. Because of taxes imposed on employees who work, many individuals on public subsistence feel that they fare better by remaining on government assistance. However, the EITC does not prevent individuals from receiving specific welfare benefits, nor does the EITC impact eligibility for food stamps, Medicaid, Supplemental Security Income (SSI), low-income housing, or specific Temporary Assistance for Need Families.

While the Child Tax Credit is designed specifically for families, childless workers may qualify for Earned Income Tax Credit if they meet certain requirements. Many low income wage earners miss out on EITC benefits simply because of an erroneous belief that they must have children in order to claim a legitimate EITC deduction. But low-income workers with a valid Social Security number and proof of earned income from 9-to-5, part time, or self-employment can meet basic qualifications. Employees seeking to file for EITC must be full year U.S. citizens or resident aliens. Non-resident aliens married to U.S. citizens or resident aliens filing jointly also qualify. In addition, qualifying individuals must be between the ages of 25 and 65 by the end of the year. However, they cannot qualify as another taxpayer's dependent, or as the qualifying child of another person. Special EITC rules also apply for military personnel, members of the clergy, and those who receive disability retirement income. IRS.gov gives detailed information about each of these special categories.

Individuals seeking to file for Earned Income Tax Credit can check for eligibility online via the EITC Assistant. Employees who qualify for EITC on federal returns are also advised to investigate whether a state of residence also offers EITC. IRS.gov features links to state websites with more detailed information on how to qualify and file for Earned Income Tax Credit. Many taxpayers may qualify for significant deductions by claiming a Child Tax Credit or Earned Income Tax Credit; but it is up to the individual to search for opportunities to reduce taxes or receive refunds. Every dollar saved can go toward improving the life of a little one. A thorough online investigation of federal and state government websites may reveal even more opportunities for low-income wage earners to offset the high cost of childrearing and reduce taxes.

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