Child Tax Credit

Child Tax Credit (CTC)

The Child Tax Credit (CTC) is an important tax credit tax payers may claim on their federal tax returns. Claiming the CTC will lower the amount of taxes that families owe to the federal government. For the tax payers with low (but some) earned income and who may not owe any taxes or owe less than the full amount of CTC, may also be able to receive a “refund” from the federal government.

1. To claim the Child Tax Credit, you must have at least one “qualifying” child and have income under a certain limit, depending upon your tax filing status (e.g., single, married filing jointly, etc.).
2. A qualifying child can be taxpayer’s child, step child, grandchild, great grand child and also adopted child.
3. Child should be under age 17 years at the end of 2008,
4. Child should have lived with the taxpayer for more than half of 2008 (A child is considered to have lived with the taxpayer for all of 2008 if the child was born or died in the year 2008 and taxpayer’s home was the child’s home for the entire time he/she was alive) and
5. Child must be resident of US or U.S Citizens or U.S National.

The Child Tax Credit (CTC) is $1,000 per “qualifying” child. It is important to note that when the credit amount is more than what is owed in taxes, the CTC is partially refundable through Additional Child Tax Credit, provided you qualify.

The CTC is “partially refundable” for some through Additional Child Tax Credit. In order to get Additional CTC, you must have taxable earned income above $8,500 for tax year 2008 and owe less in taxes than the CTC amount you may claim.

Limits on CTC: The CTC is limited to the extent of taxes you owe and if you do not owe any taxes you may not be entitled to this credit. But you may take additional child tax credit if you qualify. Credit is reduced to the extent of 5% for every increase in $1,000 above $110,000 (Married filing jointly), $75,000 (Single, Head of Household and Qualifying widow/(er) with dependent child) and $55,000 (Married filing separately).

This Child Tax Credit should not be confused with the Child and Dependent Care credit. A person by virtue of having a “qualifying” child can claim the CTC; whereas, the Child and Dependent Care credit is intended for taxpayers who pay expenses in order to provide care for children under the age of 13 (or care for persons who have a disability and can be claimed as a “dependent”) while they work.

Kishore Kumar Chennu, author of this post, is Senior Consultant, Corporate Trainer and founder of International Tax Business School (ITBS)training in US, UK, Indian, Canada and Australian Income Taxes (http://www.taxbizschool.com/), The views expressed in this post are personal views of the author. International Tax Business School serves students, employees, corporates by offering a wide range of services, which typically are offered by a large training centers, In-house training Centers, Corporate Training firms. Write to kishore@taxbizschool.com for additional information about International Tax Business School & its offerings. Disclaimer: ITBS does not offer legal services or legal advice, but only generic information on legal subjects.