Subscribe RSS FeedIf you who have a dependent child who is younger than 17 by December 31, 2009 then you may be eligible for a $1,000 Child Tax Credit for each child.
How to Claim the Credit – To claim the Child Tax Credit there are requirements for the qualifying child, requirements for the taxpayer and certain limits on the amount of the credit. In general, a qualifying taxpayer must follow the same rules as claiming a dependency exemption with the exception that the child must be under the age of 17 before December 31, 2009. In order for the child to qualify, the child must not have provided his or her own support during 2009 and child must have lived with the taxpayer for more than half of the year. In addition the child must be the taxpayer’s child, stepchild, adopted child,eligible foster child, grandchild, brother, sister, stepbrother, stepsister, etc. Further, a qualifying child must be a U.S. citizen or resident of the United States.
Limitations – The amount of the credit that a taxpayer can claim for a Child Tax Credit is dependent upon the taxpayer’s tax liability, modified adjusted gross income and filing status. The child tax credit begins to phase out when the taxpayer’s modified adjusted gross income is $110,000 for joint filers or $75,000 for single taxpayers or $55,000 for married taxpayers filing separately. If the credit exceeds the taxpayers tax liability, then the taxpayer may be eligible for a refundable credit. This additional credit is commonly referred to as the “Additional” Child Tax Credit and will be discussed below.
2009 Changes – Previously to be eligible for the refundable portion of the Child Tax Credit you were required to have earned income in excess of $12,550. The Recovery Act now reduced the earned income minimum from $12,550 to $3,000 and thereby, increased the eligibility for claiming the credit.
Additional Refund – The Child Tax Credit amount cannot exceed your tax liability. For instance, if your tax liability is zero, then the Child Tax Credit is zero because there is no liability to decrease. The good news is that, if you are unable to take the full amount of the Child Tax Credit then you may be entitled another credit called the “Additional” Child Tax Credit.
What Happens If I am Not Eligible for the Child Tax Credit – In you do not qualify for the Child Tax Credit, then you may qualify for the “Additional” Child tax Credit. The amount of the “Additional” Child Tax Credit is up to $1,000 for each qualifying child. What is good about this provision is that the “Additional” Child Tax Credit may be able to lower your tax liability to below zero and you may be able to obtain a refund for this excess. To qualify for this ” Additional” Child tax Credit, you must have a tax liability that is less than the allowable child tax credit, meet the requirements of the regular Child Tax Credit and earn more than $11,750 during 2009. If this event occurs, you may be entitled to receive a refund for the “Additional” Child Tax Credit. In order to compute this Additional Child Tax Credit there are more limitations and requirements that are not within the scope of this article and you should read IRS Publication 972.
Conclusion – In conclusion, the Child Tax Credit is a nonrefundable credit that allows you,if you qualify, to reduce your tax liability. If you are not able to use the entire amount of the $1,000 credit then you may be eligible for the “Additional” Child tax Credit which is a refundable tax credit.
This article is not intended to be legal or accounting advice. Tax laws are complex, change constantly and each situation is unique. The reader is advised to do his or her own due diligence and consult competent professionals in these areas.
Learn more about how we can help you determine if you are eligible for the Child Tax Credit and other available income tax credits and tax incentives and about our competitively priced paperless and internet methodology to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,CPA-MBA has provided business and accounting services for over 35 years and works part-time at his wife’s CPA firm
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