Now, here's a real savings to the individual taxpayer with
children. The child tax credit is a direct tax credit that is
available to provide credit to taxpayers with income below
certain established levels. The maximum credit per child is
$1000 and is first applied to reduce or eliminate the taxpayer's
tax liability. How does this tax credit work, and does everyone
qualify? Well, let's start with the last question first. Yes,
everyone with children qualifies, however the tax credit phases
out when income is above $110,000 for married filing jointly,
$75,000 for single, head of household, or widow, and $55,000 for
married filing separately.
Now, to answer the "how does it work" aspect; the best approach
might be to simply break down the requirements, and explain each
fully. The child tax credit is the responsibility of the
Internal Revenue Service, and the credit issuance is determined
through the tax returns the individual tax payer completes each
year. Taxpayers must complete either the 1040 or the 1040A and
the IRS from 8812. The IRS will then determine eligibility, and
process accordingly; the requirements and limits change each
year, so the individual's eligibility may change each year.
In order to qualify, a family must have earned at least $10,500
in income, and that figure will rise each year, according to
inflation. There must also be at least one qualifying child; in
order to be classified as a "qualifying child" the child must
meet the following requirements: under age 17, claimed on your
return as a dependent, must pass the relationship test (son,
daughter, stepchild, grandchild, brother, sister, etc.), be a US
citizen, and have a social security number.
During its original year of inception, many families with
qualifying children were mailed an advance tax credit of either
$300 or $400 dollars; but they were also told this would reduce
their end-f-year tax credit, dollar for dollar.
The method used for determining the tax credit is fairly simple,
and is not difficult to calculate; however, any individual
taxpayer should seek the advice and assistance of a tax
professional when preparing their tax return.
The credits, as stated earlier are claimed when you complete a
1040 or 1040A and file your returns with the IRS. Although many
individual taxpayers pay for a professional to complete their
returns each year, there are qualified preparers that are
available free of charge each year, through the IRS; either way,
make sure that you communicate your qualifications for the child
tax credit, and check your return to see that the credit was
applied.
The child tax credit, along with the Hope and Lifetime Learning
credits are a direct means to affect the individual taxpayer's
tax liability and offer some level of tax relief. This is meant
to help parents with the costs associated in raising children,
and educating them. Most often, the child tax credit is a way to
alleviate the existing tax liability for middle-income
taxpayers. For the extremely low income families, there is often
no tax due, so there is no allowable credit. Although it does
not help the poverty level families as a form of tax refund or
tax-free income, it does help to alleviate any tax liability.
The Earned Income Credit is used by many poverty level or
low-income families as a supplement to their earned income.
About the author:
Tony Robinson is a Webmaster and International Author. Visit
http://www.tax-portal.com/ for his tax tips.
