The Child Tax Credit

You can lower your federal income tax by using the child tax credit. You can claim a tax credit of $1000 for every qualifying child under 17 years of age. To qualify, the child must:

• Be claimed on your tax returns as your dependent
• Be less than 17 years of at the end of the tax year
• Be your son or daughter, step child, grandchild, adopted child, eligible foster child, your brother or sister, you step brother or sister or the descendant of your siblings or step siblings
• Be a citizen of the United States or a resident alien

The credit is limited when the revised adjusted gross income exceeds a certain amount. This amount depends on the filing status. Presently (as of 2005) it is:

Filing Status Amount
Married Filing Separately $55,000
Married Filing Jointly $110,000
Others $75,000

The amount of income tax owed as well as any alternate minimum tax owed will limit the amount of child tax credit you can claim. For example, if the child tax credit that you can claim is $1000 but you owe $500 as income tax. So the credit available to you will be $500. There are two exceptions to this limit rule. If the child tax credit that you can claim exceeds the amount of income tax owed, you can claim all or some of the difference as additional child tax credit. If your income exceeds $10,750 you can claim up to 15% of the excess amount (child tax credit minus tax owed). If you are a member of the Armed Forces stationed in a combat zone, the combat pay is included in calculating the credit limit. If you have 3 or more children, the social security taxes you paid within the year subtracted by any earned income tax credit you receive can be claimed. Persons qualifying under both exceptions must use the higher of the two amounts, up to the difference between the tax liability and the regular child tax credit. To calculate the additional child tax credit, you can use Form 8812.

In 2005, the total amount of child tax credit that can be claim for each child is $1000. This limit includes child tax credit as well as additional child tax credit.

If you qualify for child tax credit, you may also qualify for the Earned Income Tax Credit and Child & Dependent Care Credit.

To claim child tax credit, you must submit Form 1040 or 1040A. To know how to calculate the credit, refer to Publication 972 or the instructions to the forms.

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