| The Child Tax Credit provides a welcome tax break | | | | year, except for absences due to illness, education, |
| for many families. | | | | business, vacation or military service. |
| What makes the credit so nice is that it isn't a | | | | If more than one taxpayer is eligible to use the |
| deduction from your taxable income, it is an actual | | | | credit, a new tie-breaking rule is used. If one of the |
| reduction of your taxable income. | | | | qualifying taxpayers is the parent, the credit is given |
| Through 2010, the credit is set at $1,000 for each | | | | to the parent. If the parents don't file jointly and |
| qualifying child, as long as you are within the income | | | | both claim the child, the parent that resides with the |
| tax thresholds. There are some basic guidelines. You | | | | child for the longest period of time during the year |
| usually can't claim a child tax credit that is more than | | | | has the right to claim the child. If neither parent |
| your income tax liability, but in some cases, the | | | | claims the child, the parent with the highest adjusted |
| difference is returned to you as a refund. You use | | | | gross income has the right to do so. The old support |
| form 8812, Additional Child Tax Credit, to calculate | | | | test which required the taxpayer to have paid more |
| your additional credit. | | | | than half the child's support is no longer used as of |
| The definition of a qualifying child changed in 2005. | | | | 2005. |
| Many parents are unaware of this change. For | | | | There is a point when the child tax credit starts to |
| purposes of the Child Tax Credit, a qualifying child | | | | be phased out. The phase-out of the credit begins |
| must be under the age of 19 on December 31 of the | | | | when your adjusted gross income hits $75,000 for |
| tax year or under the age of 24 and a full-time | | | | single taxpayers, $55,000 for married filing separately |
| student for at least five months during the year, or | | | | and $110,000 for married filing jointly. |
| any age and totally and permanently disabled. | | | | The total credit is reduced by $50 for each $1,000 of |
| The child must be your son, daughter, legally adopted | | | | income that exceeds the income threshold. The |
| child, grandchild, stepchild, eligible foster child, brother, | | | | reduction is for the total credit, not for each child. To |
| sister, stepbrother, stepsister or any descendant of | | | | claim the Child Tax Credit, you must file a 1040 or |
| the above. The child must also have the same | | | | 1040A. |
| residence as you for more than half of the taxable | | | | |