I’ve written in the past about the Child Tax Credit, so I though I’d go ahead and update the information for this year’s taxes based on current IRS guidance.
In short, the Child Tax Credit the federal income tax that you owe by up to $1,000 for each qualifying child under the age of 17. In other words, it’s not a deduction (which reduces your taxable income and thus reduces your taxes fractionally). Rather, it’s a credit that gets taken straight off the top of your tax bill.
According to the IRS, a qualifying child is a child who:
1. Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew),
2. Was under age 17 at the end of 2007,
3. Did not provide over half of his or her own support for 2007,
4. Lived with you for more than half of 2007 (see Exceptions to time lived with you below), and
5. Was a U.S. citizen, a U.S. national, or a U.S. resident alien.
A child is considered to have lived with you for all of 2007 if the child was born or died in 2007 and your home was this child’s home for the entire time he or she was alive. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility, count as time lived with you.
The maximum credit that you can claim is $1,000 per qualifying child. This is potentially, a “refundable” credit, so if your credit exceeds you tax liability, you need to fill our IRS Form 8812 to see if you qualify to claim more than you owe. Also, this credit is subject to income limits based on your modified adjusted gross income (MAGI), with the following thresholds:
Married filing jointly: $110,000
Single, head of household, or qualifying widow(er): $75,000
Married filing separately: $55,000
So if your MAGI is above these limits, the credit is phased out. Unfortunately (or perhaps I should say fortunately), we’re now beyond the phase out range, and thus can’t take advantage of this.