Families panicking over the loss of literally thousands of dollars in tax breaks can take a big sigh!
Under the Bush and Obama administrations, there could have been a significant reduction if Congress hadn't taken the initiative and extended these credits. The Child Tax Credit would have dropped from $1,000 to $500 with a significant impact on many taxpayers.
The Child Tax Credit implemented and created by President Bush was due to expire by the end of 2012. Due to the fiscal cliff deal, which was signed on January 3, 2013, it was extended for the next five years.
This tax credit along with the earned income tax credit were expanded under Obama in 2009 to assist lower income Americans but could be scheduled to expire at the end of 2017. Let's look at what qualifies for this tax credit:
About the Child Tax Credit:
The Child Tax Credit allows a credit up to $1,000 per child for qualifying taxpayers. You must be able to claim a child as a dependent and meet other additional requirements. Although there is not a limit on the number of children claimed, claiming multiple children may subject you to the Alternative Minimum Tax or AMT.
Who Qualifies for the Child Tax Credit:
The child must be your daughter, son, adopted child, foster child, stepchild, brother, sister or descendant of any of the above to qualify. This child must live with you for more than half a year. The child must be under the age of 17 and the child may not have contributed to more than half of their own support.
Also this child must be younger than yourself and be either a citizen or resident alien of the U.S. All requirements must be met to claim your dependent, if a child is claimed by someone else, that person must possess a higher Adjusted Gross Income than either parent.
What Are the Income Limitations:
The credit is reduced by $50 per every $1,000 of income beyond these amounts. Here are the breakdowns for income requirements:
- $55,000 Married couples filing separately
- $75,000 Single, head of household and qualified widow(er)
- $110,000 Married and filing jointly
How Much of the Child Tax Credit is Refundable:
Should the deductions or credits reduce your tax obligations to zero, you won't get the remaining sum as a refund. You will not make a profit on your tax return but you won't owe out either. If this credit reduces your tax obligations to zero, possibly the remaining amount could be refunded as an Additional Child Tax Credit.
This depends on how many children you have and what your income bracket is. If you claim one or two children you may receive the lesser of the remaining amount of the Child Tax Credit or 15% of your income over $3,000. If you claim three or more children, you may receive the lesser of the remaining amount or greater than 15% of your earned income over $3,000.
One of the best advantages to this tax credit, is reducing any amounts of money possibly owed to the IRS. You may also efile online with TurboTax 2014, where it's quick and easy to claim your credit.