Child Tax Credit

Child Tax Credit — Taxpayers with a credit amount more than their tax could get a refund of the difference, up to 10% of the amount by which their 2004 taxable earned income exceeds $10,750. This percentage was raised to 15% for 2004, meaning a larger refund for many of these taxpayers.

You may be able to claim a child tax credit if you have a qualifying child. The credit can be as much as $500 for each qualifying child.

A qualifying child is a child who:

1. Is claimed as your dependent,
2. Was under age 17 at the end of 1999,
3. Is your son, daughter, adopted child, descendant of a child, stepchild, or foster child, and
4. Is an U.S. citizen or resident.

The credit is limited if your modified adjusted gross income (MAGI) is above a certain amount. The amount at which this phase out begins depends on your filing status, which is as follows:

1. Married filing joint $110,000
2. Head of Household/Single/Qualifying Widow or Widower $75,000
3. Married filing separate $55,000

The child tax credit is also limited by the amount of your tax liability. You may be able to claim the additional child tax credit if you have three or more qualifying children and you are not able to claim the full $500 child tax credit for each child. The additional child tax credit may give you a refund even if you do not owe tax.

The total of both credits cannot be more than $500 for each qualifying child. These credits are in addition to the child and dependent care credit and the earned income credit.

Related Articles