Here are the Rules for Claiming the Child Tax Credit
Here’s some good news for parents of children under age of 17: they’ll save you money at tax time.
The Child Tax Credit, which can be worth as much as $1,000 per qualifying child depending upon a parent’s income, was made permanent with the passage of the American Taxpayer Relief Act of 2012 (ATRA).
As a tax credit, rather than as a deduction which simply reduces taxable income, it reduces your tax liability dollar for dollar with the amount of the credit you are allowed to claim. However, you cannot take the credit for more than the amount of tax that you owe the IRS. So for example, if your tax liability is $533, but you are entitled to get $1,000 from the Child Tax Credit, it will be reduced to $533 and you will owe no taxes. However, you may be eligible to enjoy the Additional Child Tax Credit, which will result in a refund.
Naturally (we’re talking about our tax code, after all), the credit comes with many qualifiers.
The IRS says a child must pass the following seven tests for filers to qualify for this credit:
1. Age test. The child has to under age 17 at the end of 2013.
2. Relationship test. The child being claimed must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child can also be a descendant of any of these persons. For example, your grandchild, niece or nephew will qualify. An adopted child includes a child lawfully placed with you for legal adoption.
3. Support test. The child cannot provide more than half of his or her own support for 2013.
4. Dependent test. You must claim the child as a dependent on your 2013 federal income tax return.
5. Joint return test. A married child can’t file a joint return with his or her spouse if the couple is filing jointly only to claim a tax refund.
6. Citizenship test. The child must be a U.S. citizen, U.S. national or U.S. resident alien. For more detail, see Publication 519, U.S. Tax Guide for Aliens.
7. Residence test. In most cases, the child must have lived with you for more than half of 2013 to be claimed. However, a child is considered to have lived with you for more than half of 2013 if the child was born or died in 2013 and your home was this child's home for more than half the time he or she was alive.
Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. There are also exceptions for kidnapped children.
Limitations. Your filing status and income may reduce or eliminate the credit. If your modified adjusted gross income is more than $110,000 (married filing joint), $55,000 (married filing separately) or $75,000 (single, head of household) you cannot claim the credit.
If you qualify to claim the Child Tax Credit and/or the Additional Child Tax Credit you will file IRS Form 8812 with your income tax return.
You can use the Interactive Tax Tool on the IRS website to see if you can claim the credit.
For more information on this topic and to find out all the rules, see IRS Publication 972 Child Tax Credit.