How Much is the Child Tax Credit?
The child tax credit is worth up to $1,000 per child that is under 17. To be eligible to claim this credit your child or dependent must first pass all of the following tests:
- Must be 16 or younger on the last day of the year
- Must be a US citizen, US national, or a resident alien
- Must be claimed by you as a dependent
- Must be related to you by blood, or step relationship, or legally adopted child/foster child
- Must have resided with you for more than half of the year (special rules apply for special circumstances such as divorce)
- You must have provided them with more than half of their support
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What is the 2016 Child Tax Credit Amount?
- The credit is worth a maximum amount of $1,000 per child
- Until 2017, the Child Tax Credit is partially refundable if your earned income was more than $3,000.
- The Child Tax Credit decreases if you have an AGI of $75,000 ($110,000 for married filers and $55,000 for separate filers).
- You must include foreign income exclusions when calculating your income for this specific credit.
Claiming the Child Tax Credit
Any parent or legal guardian with a child age 17 or younger at the end of a tax year can claim said child for the child tax credit. The child must reside with the claiming parent for more than 50-percent of the year. The child also cannot financially support themselves with at least half of their own expenses.
When you e-file with a service such as Turbo Tax, you automatically are asked the right questions to determine how much you get for the Child Tax Credit.
TurboTax Child Tax Credit Video
The Additional Child Tax Credit
The Additional Child Tax Credit (ACTC) is a refundable credit that taxpayers who receive a larger child tax credit than their income owned receive if their earned income is greater than $3,000.
Form 1040 (Schedule 8812) helps determine if you qualify and the amount of the credit that you will receive. If you e-file your return the software will do all of the math for you. Worksheets for eligibility can be printed from the IRS.gov website anytime of the year.
Dependents on Multiple Returns
Only one taxpayer or couple can claim the child for the Child Tax Credit and ACTC. If more than one person tries to claim the child, the IRS will determine who gets to claim the child using the tiebreaker rules.
Most parents and legal guardians are aware of the earned income credit (EIC) and child tax credits that they can qualify for to reduce their tax liabilities.
Some do not know that adoption credits can be taken as well as paying out-of-pocket (OOP) for child/dependent care. These deductions can help reduce your tax liability, and in some cases, result in a refund.
Earned Income Credit (EIC) – In order to qualify for the EIC, you must meet income limitations and have the required number of qualifying children for your income level. The income thresholds can change. An example is the recent 2015 earnings year. Families with a single child filing jointly cannot have an adjusted gross income (AGI) more than $44,651. For single/head of household and surviving spouses, the income limit for a single child is $39,131
Child and Dependent Care Credit – You could deduct up to $3,000 for one dependent, or up to $6,000 for more than one with this credit. The percentage of child and dependent care costs that you can claim, as an allowable expense is 20 to 35-percent based upon your AGI. If you have a single qualifying child, the maximum credit amount is $3,000. For two or more children, the maximum credit is $6,000.
Adoption Tax Credit – If you have already adopted or are in the process, you may qualify for this credit. The process of adopting a child is costly. Some employers assist employees with adoption expenses. This “income” can be deducted and claimed as employer-provided adoption assistance. You can also claim any monies paid to an adoption agency for the adoption of a child that qualifies for the credit.
You cannot receive any excess funds. The maximum credit can change, view the yearly guidelines set by the IRS. Leftover monies are rolled forward as credits on upcoming tax returns.
Student Loan Interest – Student loan interest can be deducted up to the amount of $2,500 per school/tax year. The modified adjusted gross income constraints to claim this credit require that those filing single do not have more than $80,000 income. For those that are married, the income threshold is $160,000 if you file jointly
Filing Status – If you are unwed and your child resided with you for more than half of the year, you could qualify for a higher standard deduction and lower tax rates with the Head of Household filing status.
Exemptions – Receive the standard exemption for each child that qualifies.
How TurboTax Can Help
You don’t need to worry about figuring this all out. TurboTax makes it easy. After asking you a few simple questions about your family, TurboTax will determine for you who qualifies as a dependent on your tax return. That way, you’ll get the biggest tax refund possible with the least amount of hassle.