In recent years, with an increase in the Child Tax Relief, families with kids have been able to welcome a tax relief. This relief is not just the deductions from your taxable income but a real reduction in your actual taxes.
The Child Tax Credit Limit
With the Congress passing the Working Families Tax Relief Act 2004, the credit has been set to $1,000 per qualifying child through 2010, provided you to not cross the threshold for filing your status. A child tax credit has to be less than your income liability. But in some cases you can claim for refund which is a difference between a child tax credit and your income liability.
Who qualifies for Child Tax Credit?
The child tax credit is allowed to, a child who is under 17 at the end of a taxable year, a tax payer’s son or daughter, stepson or step daughter, a legally adopted child, an eligible foster child, to his siblings or step siblings or any descendents of the above, to him who has resided in the same place as the tax payer’s, exceptions may be however made, where the child may be absent due to illness, education, business, military services or vacation.
Do not worry if you do not meet the new criteria, you may still be able to claim the child as dependant using the tie breaker test. Yes, but you will need to meet the requirements under the old criteria.
What happens if two tax payers qualify under the new test?
Under the new test, if more than one tax payer qualifies then, the child is considered the qualifying child of a parent, if one of the qualifying person is a parent, if parents file separately, and both claim the child, then the parent with whom the child has resided for the longest period has the first right, and if both the parents have been equally with the child or if neither parents claim, then the parent or the claimant with the highest gross income has the right to do.
What are the income thresholds for the child tax credit?
Child tax credit begins to reduce when your adjusted gross income reaches a certain amount.
How to claim the Child Credit Tax?
In order to claim Child Tax Credit see form 1040 or 1040 A.