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Military Taxes: Family/Spouse Issues

An Army family walks hand-in-hand (Photo: U.S. Army/David Vergun)
An Army family walks hand-in-hand (Photo: U.S. Army/David Vergun)

Military families must contend with moving and child care issues -- and both of these issues can be very expensive. However,  Permanent Change of Station (PCS) and the Child Tax Credits can help ease the financial strain of frequent moves and raising children.

Moving Expenses
For more information on moving expenses and their tax implications, jump to the section on moving.

Child Tax Credit
The child tax credit is a credit that can reduce your tax. If you have children, you may be able to take a child tax credit on your tax return for each of your qualifying children.

The child tax credit is not the same as the credit for child and dependent care expenses. See Publication 503 for more information on the credit for child and dependent care expenses.

Qualifying Child
A qualifying child for purposes of the child tax credit must be all of the following.

  • Under age 17 at the end of the year
  • A citizen or resident alien of the United States
  • Claimed as your dependent
  • Your:
    • Son or daughter, or
    • Stepson or stepdaughter, or
    • Adopted child, or
    • Grandchild, or
    • Eligible foster child
    • Brother, sister, stepbrother, or stepsister; a descendent (such as a child including an adopted child) of your brother, sister, stepbrother, or stepsister;
    • A child who was born or died in the year is considered to have lived with you for all of the year if your home was the child's home for the entire time he or she was alive during the year.
Adopted child. A child placed with you by an authorized placement agency for legal adoption is an adopted child even if the adoption is not final.

Eligible foster child. An eligible foster child is any child you cared for as your own and who is placed with you by an Authorized placement agency. An authorized placement agency includes any person authorized by state law to place children for legal adoption.

Amount of credit. The maximum amount of credit that you can claim is $1,000 for each qualifying child.

Limits on the credit. Your credit may be limited depending on the amount of your tax liability and your modified adjusted gross income (AGI).

You must reduce your child tax credit if:
  • Your tax liability is less than the credit, or
  • Your modified AGI is above the amount shown below for your filing status.
    • Married filing jointly-- $110,000
    • Single, head of household, or qualifying widow(er)-- $75,000
    • Married filing separately-- $55,000
Tax liability. Your tax liability is the amount on line 40 (Form 1040) or line 26 (Form 1040A). If this amount is zero, you cannot take this credit because there is no tax to reduce. But if you have three or more qualifying children, you may be able to take the additional child tax credit. See Additional child tax credit, below.

Modified AGI. For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you.
  • Any amount excluded from income because of the exclusion of income from Puerto Rico.
  • Any amount on lines 43 and 48 of Form 2555, Foreign Earned Income.
  • Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion.
  • Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa.
If you do not have any of the above, modified AGI is the AGI amount on line 34 (Form 1040) or line 20 (Form 1040A).

Claiming the credit. To claim the child tax credit, you must file Form 1040 or Form 1040A. You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child.

Answer the Questions in your form instructions for line 47 (Form 1040) or line 30 (Form 1040A) to find out which child tax credit worksheet you can use to compute the credit.

If you answer "Yes" to question 1, 2, or 4 in your Form 1040 instructions or question 1 or 3 in your Form 1040A instructions, you must complete the Child Tax Credit Worksheet in Publication 972, Child Tax Credit.

Additional child tax credit. This credit is for certain people who have three or more qualifying children, as defined earlier. The additional child tax credit may give you a refund even if you do not owe any tax.

How to claim the additional child tax credit. To claim the additional child tax credit, follow the steps below.
  • Make sure you figured the amount, if any, of your child tax credit.
  • Use Form 8812, Additional Child Tax Credit, to see if you can take the additional child tax credit only if you answered "Yes "on line 4 or line 5 of the Child Tax Credit Worksheet.
  • If you have an additional child tax credit on line 13 of Form 8812, carry it to line 65 (Form 1040) or line 42 (Form 1040A).
More information. For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A.

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