The Child Tax Credit helps offset some of the costs associated with raising children. Qualified taxpayers are able to take the credit up to $2,000 per child. There are seven requirements for taking the Child Tax Credit. One of the benefits of this credit is that it can be used in combination with childcare and dependency deductions.
Estimating your child tax credit can be easy by using the free dependents tax credit calculator provided by TurboTax. This tax credit should not to be confused with the child and dependent care credit because they are different credits.
Up to $2,000 is credited per qualifying child. The amount that you can claim is dependent upon your income. Qualifying child is one that is under age 17 at the end of a tax year. For the tax year, a portion of the Child Tax Credit can be refunded as long as there is an earned income that is more than $3,000.
For guidelines on the refundable portions, it is ideal to view the Additional Child Tax Credit information on the IRS.gov website.
There are six main requirements that determine eligibility for the Child Tax Credit.
Age – Children must be age 16 or younger on December 31st of any given tax year
Citizenship – Qualifying children must be legal U.S. citizens, documented resident aliens, or a
U.S. national citizen.
Dependent – Qualifying children cannot support themselves by more than 50-percent, they
must qualify as a dependent and be able to be claimed as such on a tax return.
Relationship – Qualifying children must be related to you.
The relationships that count are:
Nieces and nephews
Children that are legally adopted or lawfully placed with a family for the purpose of adoption, including foster children, can be claimed.
Residency – Children must reside within the home for more than 50-percent of the year, which equals 183 nights. There are circumstances where exceptions are made, such as special rules that are in place for divorced parents. Publication 972 on the IRS website explains the special circumstances accepted.
Support – Children do not qualify if they financially support themselves more than 50-percent of the time in a tax year.
Additional Child Tax Credit Eligibility
The Additional Child Tax Credit is granted when your Child Tax Credit is more than your amount of total taxable income owed. The stipulation is that your earned income must be $3,000 or more. Schedule 8812 is the worksheet that can be used to determine qualification for the credit. It also calculates the amount of credit you will receive.
Claiming Dependents on Multiple Tax Returns
A dependent child may only be claimed by one person. If multiple claims are discovered for the same social security number, the IRS will use a tiebreaker system to determine which parent can claim the child. It is ideal for parents that are not married to alternate years claiming dependent children and decide the pattern of claiming the dependents ahead of time.
More Child-Related Tax Credits and Savings
Even with the Child Tax Credit and Additional Child Tax Credit, you still claim the standard deduction. If you pay for childcare or dependent care, you may deduct up to $3,000 per qualifying child. If you have multiple children, you can deduct up to $6,000 total.
Adopting a child or being in the process of adopting a child opens up another credit. The Adoption Tax Credit can be applied for, and completing a worksheet will help you determine your eligibility for the credit.
Filing as the head of your household, as a single person with children living with you for at least 183 nights of a tax year, you may be able to claim a higher deduction. This would also allow you to have lowered tax rates.
Claiming the Child Tax Credit
If you use online tax filing software, it automatically checks to see if you can claim the Child Tax Credit. Those that file using paper returns, will have to use online references and worksheets to help determine the amount of your credit. Filing online gives you the exact amount of the credit that you can claim.
TurboTax has adependents tax credit estimator which is the same as a child tax credit calculator to calculate your tax credits for you. You will answer easy questions about your income, filing status, children, and marital status. The tax calculator goes to work for you and your credits are displayed on the right hand side of your screen. Don’t miss out on claiming your tax credits.
Claiming and Calculating the Child Tax Credit – TurboTax Tax Tip Video