Written by Marc R Barnes EA
August 08, 2009
The Child Tax Credit is a credit worth up to $1,000 for each qualifying child on your Federal tax return. If you have 4 children, the credit can cut your Federal income tax bill by up to $4,000. Remember, a tax credit offsets your tax bill dollar for dollar. A child must meet 5 criteria for you to receive child-related tax benefits. He or she:
  • Must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of them
  • Must be younger than 17 at the end of the year
  • Must not have provided more than half of his or her own support
  • Must live with you more than half the year
  • Must be a U.S. citizen, U.S. national or resident of the U.S.

New for 2009:

Beginning with the 2009 tax return, the child must be your dependent and the child must be younger than the person claiming the credit. Also, the 2009 American Recovery and Reinvestment Act increases the eligibility for this credit.

Child Tax Credit for Individuals with Higher Incomes

The Child Tax Credit is available regardless of your filing status. However, your credit is reduced if your modified adjusted gross income (MAGI) is more than:
  • $110,000 if Married Filing Jointly
  • $75,000 if Single, Head of Household or Qualifying Widow(er)
  • $55,000 if Married Filing Separately
For every $1,000 (or fraction of $1,000) your MAGI exceeds the trigger point, you lose $50 of credit.

For example, if you file a joint return and your MAGI is $115,000, the extra $5,000 exceeding the limit would reduce your credit by $250. So if you have only 1 qualifying child in 2008, your credit would be $750. If you have 3 qualifying children, your credit would be $2,750 ($3,000 minus $250).

Additional Child Tax Credit

The Child Tax Credit can't reduce your tax below zero. However, if your Child Tax Credit is limited by your tax, you may be eligible for the additional Child Tax Credit, even if your tax liability is zero. You may be eligible if:
  • Your taxable earned income is more than $8,500 (for 2008).
  • You have 3 or more eligible children and the Social Security and Medicare tax you paid is more than your Earned Income Credit.

Topic: Marriage and Family