Monday, September 26, 2011

Raising children can cost a lot of money these days, and many parents find themselves needing financial help from time to time. In an endeavor to provide financial assistance for American parents, the IRS has offered a tax credit to those who need to provide financial support for children. The Child Tax Credit was introduced in the year 2010, and it will be available until 2012. With this tax credit, parents can save a substantial amount of money, and they can provide for their children with greater ease.

The Child Tax Credit is offered to parents of children who are younger than 17 years old. If you are eligible for this tax credit, you can reduce your tax bill by $1,000 for every child that you are supporting. If you have three qualifying children, you can reduce the amount of tax you owe to the IRS by $3,000. However, the amount of credit will be reduced if you are earning an income that exceeds certain levels. The Child Tax Credit has no effect on the exemption deductions that you will be getting for dependent children. This means that you are allowed to claim both Child Tax Credit and exemption deductions in the same tax year.

Besides being younger than 17 years old, your child has to meet certain qualifying criteria to be eligible for the Child Tax Credit. Firstly, he or she has to be your son, daughter, stepchild, sibling, stepsibling, grandchild, nephew, niece, adopted child, or foster child as well as a United States citizen, national, or residential alien. Also, your child must not be responsible for providing more than half of the financial support he or she needs. It is also necessary that you state that he or she is a dependent when you are filing your tax return. Lastly, your child must have shared the same residence with you for a minimum of six months during the tax year.

Under normal circumstances, you will not be able to get a refund of your Child Tax Credit. This means that if your tax liability is lower than your credit, your tax liability will become zero, and any unused credit that you may have will be lost. However, you will be eligible for a refund if you are earning below a certain threshold. You can avail of the Additional Child Tax Credit, which will give you a refund even if your tax liability is lower than your credit.

Calculating Child Tax Credit can be a complicated task, especially if you have more than one qualifying children or you are applying for Additional Child Tax Credit. When the calculation becomes confusing, there is a greater tendency for you to make mistakes. One way to ensure that your Child Tax Credit will be correctly calculated is to use a Child Tax Credit calculator. Presently, there are many effective Child Tax Credit calculators from leading developers of tax preparation software on the Internet, and some of them can be used for free. These user-friendly calculators are specially designed to help you calculate your Child Tax Credit in the most accurate and fastest way possible, and they can make your tax preparation experience a lot less stressful.
Tax credits allow taxpayers to reduce the amount of tax which is owed. Some of these tax credits are the Disability Tax Credit, Energy Tax Credit, First-time Homebuyer Credit, Earned Income Credit, and Credit for the Elderly and the Disabled. The Child Tax Credit is one of the most common credits to be claimed by taxpayers in the United States. Let’s learn more about child tax credit for 2012.

In 1998, the Child Tax Credit amount for each child was only $400. In 2012, the Child Tax Credit can be worth a maximum of $1,000 for each qualifying child below 17 years old. Depending on your income level, the Child Tax Credit may be used to lower your federal income tax by a specific amount. To qualify for Child Tax Credit, the child must meet the qualifying requirements as outlined by six tests:

Age Test

To be eligible for the Child Tax Credit, the child must be below 17 years old when the taxable year ends. It means that the child has to be 16 years old or younger.

Relationship Test

The relationship of the child and the taxpayer must be established. To qualify for Child Tax Credit, the child must be the taxpayer’s daughter, son, foster child, stepchild, sister, brother, stepsister, stepbrother or a child of any of the mentioned persons. The taxpayer’s niece, nephew or grandchild will qualify. In the United States, an adopted child will always be considered to be a person’s own child. To qualify, the adopted child must be legally adopted by the taxpayer according to the laws of the state.

Support Test

To claim a child for the Child Tax Credit, the taxpayer must show that the child does not offer more than 50 percent of their own support.

Dependent Test

On the federal tax return, the taxpayer must state that the child is a dependent.

Citizenship Test

To qualify for Child Tax Credit, the child has to be a United States citizen, national, or residential alien.

Residence Test

The taxpayer must have lived with the child for a minimum of half of the taxable year.

If the adjusted gross income of the taxpayer is higher than a specific amount, the Child Tax Credit can be limited. Depending on the filing status of the taxpayer, the beginning phase-out amount varies. The phase-out amount for married taxpayers who are filing a joint return starts at $110,000. For taxpayers who are married and filing returns separately, the phase-out amount starts at $55,000. The phase-out amount for all other taxpayers starts at $75,000. In cases where the taxable income is higher than the phase-out amount, the total for the Child Tax Credit is reduced by 5 cents for every $1 above the threshold. In this sense, the Child Tax Credit is not available for families with joint income of $130,000 or more. Other limitations of the Child Tax Credit include amount of income tax and any alternative minimum tax owed by the taxpayer.

If the amount of income tax owed by the taxpayer is lower than the Child Tax Credit amount, the taxpayer may be able to receive the Additional Child Tax Credit.

Monday, August 22, 2011

The US government is aware of the financial hardships that some parents have to go through to bring up their children, and it has taken measures to help them reduce their financial burdens. President Obama has reached a tax cut deal called the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act with the Republicans, and the Child Tax Credit part of the deal, which was implemented in 2010, will be extended through 2012. This tax cut deal ensures that a large percentage of American parents will get a considerable amount of tax credit from the government every year for providing financial support for their children.

If you are a parent of a child who is under the age of 17, you may be eligible for Child Tax Credit. You are allowed to claim up to $1,000 for every child who meets all the qualifying criteria. This child tax credit is considered a non-refundable income tax credit, which means that if your credit is more than your income tax liability, you will not receive a check for the difference.

Additionally, it is a subtraction from the actual taxes that you owe, and therefore, it is more valuable than a tax deduction, which is subtracted from your actual income. If you are earning an income that is below a certain level, you may be entitled to claim “Additional Child Tax Credit”, which enables you to get a tax refund if your credit is higher than your tax liability.

In order to qualify for Child Tax Credit, a child has to pass six different tests, which are the age test, relationship test, support test, dependent test, citizenship test, and residence test. In the age test, a child has to be younger than 17 years old, meaning 16 years old or below, at the end of the tax year. To pass the relationship test, the child has to be your son, daughter, brother, sister, stepchild, stepbrother, stepsister, foster child, or a descendant of one of these relations, including grandchild, nephew, or niece.

An adopted child can also qualify if he or she is legally adopted by you. The support test requires you to prove that your child has not provided more than half of his or her own support. For the dependent test, you need to list the child as a dependent in your tax return. To meet the requirements of the citizenship test, the child has to be a citizen, national, or resident alien of the United States. Finally, you have to prove that the child has lived with you for at least half of the tax year.

The 2011 Child Tax Credit will be limited if you have a modified adjusted gross income that is above a specified amount. The amount for the beginning of the phase out varies according to your filing status. If you are married and you are filing a joint tax return, the phase-out will begin at $110,000. The phase-out amount for a married taxpayer filing separately is $55,000. For any other taxpayer, the phase-out will start at $75,000. Additionally, the Child Tax Credit can be limited by the income tax and alternative minimum tax you owe.

Thursday, April 28, 2011

Child Tax Credit Amount 2012, 2013

As a regular, tax-paying citizen, I can attest to the difficulty of surviving the world of taxes as it is these days. While corporations see endless breaks and advantages, we are taxed at heavier rates and prevented from utilizing many of the private resources that originally existed to help us all through this life. Where’s my tax break? Well, there are some small things that we count on including the 2012 additional child tax credit.

The child tax credit amount comes out to 1,000 dollars per child. The child tax credit, as opposed to a tax deduction, will actually take away tax dollars owed instead of just lowering taxable income. The amount of this credit can only be received for each child under the age of 17 in your house. There are some requirements that need to be fulfilled in order for a child to count for the child tax credit amount 2012.

Also, the 2012 child tax credit amount can be taken in addition to your dependent tax exemptions that you’ve claimed. This obviously makes it a superior benefit when compared to a run-of-the-mill tax deduction.

But the full amount of the 2012 child tax credit can only be received by those children under 17 who is your legal child by blood or adoptive proceedings, your legal child or stepchild or your legal grandchild. This can be claimed for foster children as long as your foster child lived in your house for the full length of the tax year .

Are they taking away the 2012 child tax credit? No, but in 2012 the credit amount goes down to $500 per child.
You must be prepared to have each child’s Tax Identification Number (TIN) and/or their Social Security numbers for legal purposes. This shouldn’t startle anyone because real proof of your legal guardianship is an obvious requirement for getting the child tax credit amount.

The amount of the child tax credit will not (most of the time) directly result in giving you extra money. At the very most, it can reduce your tax liability to zero; the remainder “amount” of the child tax credit will simply not exist.

There are some cases where the 2012 child tax credit amount exceeds your tax liability, but you can get what’s called the child tax credit refund. This is what’s referred to as the additional child tax credit, and can be worked with on income tax form 8812.

If you are a family with three eligible children or fewer, then the child tax credit can be refundable for up to fifteen percent of your taxable earned income that is greater than three thousand dollars.

Now, if you are a family with four or more eligible children for the child tax credit amount, then the refundable amount may be in excess of your Social Security taxes over the earned income tax amount. Or, it can be in excess of three thousand dollars, whichever route is greater will be the best to take.

Sounds confusing, huh? If you file you taxes online with a company like TurboTax, all of this guesswork and research and calculation is automatically done for you as you submit relevant information during the tax filing process.

The route which will guarantee the most money back to you will be the route automatically taken, as their 100% biggest refund guarantee is no idle boast.

There were some changes in 2009 that saw the threshold of 12,500 move to 3,000 which has made it much easier to qualify for the refundable additional child tax credit amount.

It should be noted that the otherwise child tax credit amount is phased out for those taxpayers with a modified adjusted gross income above certain thresholds. If this is indeed the case, then the amount of the child tax credit will be reduced (not below zero) by $50 per $1,000 your modified adjusted gross income surpasses the threshold amount.

The threshold phase in amounts are $110,000 for joint returns, $75,000 for single filers, and $55,000 for married people filing separately.

Taxpayers paying the alternative minimum tax can use the amount of the child tax credit to positively affect it.

Like mentioned above, by filing with an online tax company like TurboTax Online, the amount of the child tax credit will be automatically applied as you enter in all relevant tax information. You can also utilize their income tax calculator to estimate how claiming the child tax credit will affect your income taxes. The estimator can be used prior to actual filing, and also during the actual filing, in a way.

The only tax filing package that you have to pay for up front is the TurboTax “business” package. All of the rest you can begin for free and are only obligated to pay for upon reaching the very last page when you click “send and file.”That means that you can get a real-life glimpse at exactly what your finances will look like including all relevant credits and deductions regarding the child tax credit amount.

Wednesday, June 30, 2010

Child Tax Credit 2012, 2013

If you have children who are under 17 as of the end of the tax year, you can get a $1,000 from the child tax credit on your tax return. Your child must be 17 before December 31 of the year in which you are trying to claim them.

There are some qualifications that must be met in order for you to claim the credit. You will need to have the name and social security number for each child that you are trying to claim. The child may not be claimed on anyone else's tax return for that filing year.

Because this is a credit, not a deduction, you get to take those dollars right off your tax bill. That makes this much better than a deduction would be, which would just reduce the income you use to determine taxes. And the credit does not affect the exemptions you take for dependents. The credit tax credit is in addition to your exemptions. If you do qualify for this credit you will claim the credit on form 1040 or form 1040A. If you are still wondering if you qualify for the child tax credit you can take the relationship test. There are a few questions that will help you determine this.
  • The child that you are claiming must have received 50% of thier support from you
  • The child must be a United States citizen or a resident of the United States.
The child tax credit will began to phase out if your income exceeds $110,000.00 and you are married filing jointly. If you are filing single, head of household, or as a widow(er) then you will begin to see the credit phase out at $75,000.00. If you are married and you and your spouse have decided to file separately then the credit will start reducing if your income exceeds $55, 000.00.

How Much is the Child Tax Credit Amount?

In most cases, the 2012 child tax credit amount is limited to the amount of tax liability on your return. In other words, if your credit is bigger than your tax liability, your tax liability is just reduced to zero, and the rest of the credit is lost.

In certain cases, though, you can get a child tax credit refund when the credit exceeds your tax liability. This means that you would get a refund of the difference between your tax credit and what you owe in taxes. This refundable child tax credit is called the Additional Child Tax Credit, which you calculate on Form 8812.

For families with three qualifying children or fewer, this tax credit is refundable to the extent of 15 percent of taxable earned income in excess of $3,000 for 2010. For families with four or more qualifying children, the refundable amount may be the excess of the family's Social Security tax over the earned income credit, or the extent of 15 percent of taxable earned income in excess of $3,000, whichever is greater.