Child Tax Credit for 2011
The child tax credit is a powerful tax credit that can greatly decrease your tax liability. You may have a lot of questions about the child tax credit and how the tax credit for children can benefit your family. You can receive a $1,000 tax credit for each child under the age of 17 on your tax return. Four qualifying children, for example, can erase the amount you are taxed on to Uncle Sam by $4,000.
Child Tax Credit Facts
The Test of Relationship - In order to meet the criteria in the relationship test for claiming the child tax credit, the child must be a son, daughter, stepchild, foster child, brother, sister, step brother, step sister, or a descendant of any of the previously mentioned individuals. For example, a grandchild, niece, or nephew would be a descendant of a child or sibling. Of course a legally adopted child is always considered the same as a biological child as long as the adoption is legal.
Amount - When claiming the child tax credit, each qualifying child under the age of 17, may reduce the amount of money you pay taxes on by $1,000 per qualifying child.
Qualifying for the Child Tax Credit - The IRS has six tests of criteria to pass the qualification for the child tax credit. The six tests are age, relationship, support, dependent, citizenship, and residence which must be met in order to be able to claim the child tax credit.
The Test of Support - You have to be the provider of support for the child for more than half of their support in order to claim the credit for this child.
The Test of Age - By the end of 2010 the child must be 16 years old or younger. The age criteria are under the age of 17. The important word there is “under” not to be confused with 17 and under.
The Test of Dependency - In order to claim the child for the child tax credit you must claim the child as a dependent on your federal income tax form.
The Test of Residency - The child must have lived with you for more than half of the year. Exceptions to this test exist which can be explored further if need be.
The Test of Citizenship - The child must be a U.S. citizen, a U.S. national, or a U.S. resident alien.
The Child Tax Credit is one of the trickiest tax credits out there and that is exactly why you might want to consider using tax preparation software, such as TurboTax Online to claim the child tax credit.
The formula for computing the child tax credit and the additional child tax credit can be quite confusing. The child tax credit is so large, you will want to be sure your income tax return is accurate or else you may have a huge payment due to Uncle Sam and nobody wants to face that.