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.