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.

1 comment:

  1. Negotiate your starting salary or pay raise by being better informed about salaries at your company.

    Foreign Investor Home Loan

    ReplyDelete