When Can I Take the Child Tax Credit?

You may be able to take the Child Tax Credit if you have a qualifying chil under the age of 17. Here's what you need to know.

You may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.  To qualify for this credit, the child must meet the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

Age test. To qualify, a child must have been under age 17 -- age 16 or younger -- at the end of 2011.

Relationship test. To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

Support test. In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

Dependent test. You must claim the child as a dependent on your federal tax return.

Joint return test. The qualifying child can not file a joint return for the year (or files it only as a claim for refund).

Citizenship test. To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

Residence test. The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

There are limitations to be aware of -  The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.

Additional Child Tax Credit. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Questions about the child tax credit? Give us a call today.

Executive Resources FSI - 530-888-6691  Serving Auburn, CA and Placer County

How Can Children Lower Taxes - 8 ways?

Got kids? They may have an impact on your tax situation. Here are the top 8 things to consider if you have children.

1.      Dependents: In most cases, a child can be claimed as a dependent in the year they were born. Be sure to let us know if your family increased this year and we'll take a look at whether you can claim the child as a dependent this year.

2.      Child Tax Credit: You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.

3.      Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child under age 13 so that you can work or look for work. Be sure to keep track of your child care expenses so we can claim this credit accurately.

4.      Earned Income Tax Credit (EITC): The EITC is a benefit for certain people who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.

5.      Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt a child.

6.      Coverdell Education Savings Account: This savings account is used to pay qualified expenses at an eligible educational institution. Contributions are not deductible; however, qualified distributions generally are tax-free.

7.      Higher Education Credits: Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar for dollar, unlike a deduction, which reduces your taxable income.

8.      Student Loan Interest: You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions.

As you can see, children can have an impact on your tax profile. If you're a parent, we'll go over your situation with you to make sure you're getting the credits and deductions you're entitled to.

Do you have more question?  Are you maximizing your deductions?  Give us a call for all your Bookkeeping and Tax Preparation Needs!  Serving Auburn and Placer County.

Executive Resources FSI  Deborah Sandbank - 530-888.6691  Auburn, Ca