The Child Tax Credit is a valuable credit that can significantly reduce your tax liability. With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17. To claim the Child Tax Credit you must determine if your child is eligible, there are seven qualifying tests to consider:
- Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.
- Dependent Test - You must claim the child as a dependent on your federal tax return.
- Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residence Test - The child must have lived with you for more than half of the tax year. Temporary absences such as vacation, medical care, military service, etc. are counted as time living with you. There are also some exceptions for children of divorced or separated parents.
- Income Test - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
Additional Child tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.
For more information, see the IRS's Official Armed Forces Tax Guide.