Parents deserve a bit of a (tax) break now and then.
As a busy parent, filing taxes can be found on the To-Do list between Monday’s soccer practice and Thursday’s parent-teacher conference. Do yourself a favor this year and see if you are eligible for the Child Tax Credit. Tax credits are great because, unlike deductions, they reduce your tax bill dollar-for-dollar. That means, a larger tax refund for you and your family!
What is the Child Tax Credit?
The Child Tax Credit offers a credit of up to $1,000 per child to qualifying taxpayers. It is only available to those who can claim a child as a dependent and meet several other requirements.
There is no limit to the number of children you can claim using the Child Tax Credit, however, claiming lots of kids may subject you to the Alternative Minimum Tax (AMT).
Who can claim the Child Tax Credit?
In order to claim the Child Tax Credit, the child in question must:
- be your son, daughter, stepchild, foster child, adopted child, brother, sister, or a descendant of any of these
- have lived with you for more than half the year
- be under age 17 at the end of the year
- not have provided more than half of his/her own support
- be a citizen or resident alien of the United States
- be younger than you
- not file a joint return with his/her spouse (though there are exceptions)
- meet the requirements to be claimed as your dependent
- be claimed by his/her parents – if claimed by someone else, that person must have a higher AGI than either parent.
Are there income limitations?
The Child Tax Credit phases out beyond certain levels of income:
- $55,000 for married couples filing separately
- $75,000 for single, head of household, and qualifying widow(er)
- $110,000 for married filing jointly
The credit is reduced by $50 for every $1,000 of income beyond these thresholds. Note that they are not indexed for inflation.
How much of the credit is refundable?
Generally if credits and deductions manage to reduce your tax liability to zero, you don’t receive the remaining amount as a refund. In other words, the best you can hope for is to break even – there’s no chance of making a profit from your tax return.
But if the Child Tax Credit helps reduce your tax liability to zero, the remaining amount is refunded to you in the form of the Additional Child Tax Credit. Exactly how much is refundable depends on how many kids you have and how much income you earn.
Taxpayers with one or two children can receive the smaller of:
- the unused portion of the Child Tax Credit, or
- 15% of your earned income over $3,000
Taxpayers with three or more children can receive the smaller of:
- the unused amount or,
- the larger of either
- 15% of a person’s earned income over $3,000, or
- the sum of Social Security and Medicare taxes paid minus the earned income credit
Cross off taxes on your To-Do list today!
Keeping track of all these IRS rules and regulations can get confusing. Thankfully RapidTax keeps things simple. Just enter your information into its online application and it will make sure you claim every cent of the Child Tax Credit that you deserve.
Easy, right? You’re done…just in time to get the kids off the bus!
Can I claim my 1 year old whos been in my custody since birth without working??
And is there a way to stop her dad from claiming her I know it sounds petty but I let him claim her last year and he and his mother took the money and I didn’t get 1 penny
Hi Latrise,
You can file a tax return without having any taxable income. Typically, taxpayers will do this so that they can claim tax credits that they are still entitled to. Just be sure to look into which credits you will be claiming. Some DO require that you have some sort of taxable income from the tax year.
In regards to preventing her father from claiming her, that can get tricky. If he files his tax return first, claiming your daughter as his dependent and it is accepted by the IRS, you will need to paper file your return. The IRS will reject your return and let you know how to proceed. This typically means that you will need to dispute the rejection with proof that you are the child’s custodial parent and meet all tests that the IRS has instated are met. Take a look at our other blog article HERE. It relates more to your second question.
Hello my question is, I pay child support for both my boys they both live with there mother (Custodial parent) My ex wife has let me claim at least one but she says she is claiming all 4 of her children which 2 of those 4 are mine.. Does parents that pay child support for there children receive any credit at all?? Or am I just SOL???
Hi Joshua,
Although you pay child support, the IRS rules are rarely impacted by the courts. The IRS looks at several basic tests to determine who can claim the child as a dependent or claim a credit for the care of the child:
1. Relationship: the person must be your daughter, son, stepdaughter, stepson, foster child, sister, brother, half-sister, half-brother, stepsister, stepbrother, or a descendant of any of these, such as a niece or nephew.
2. Age: the person must be under the age of 19 on the last day of the year (24 if a student) or permanently disabled (regardless of age).
3. Support: the person must have have been provided at least half of their support from you for the year. Support includes food, housing, clothing, transportation, medical expenses, recreation, etc…
4. Residency: the person must have lived with you for more than half the year. The only exception is for temporary absences (ie: the child is away at college for the semester).
5. Joint Return: the person cannot be filing a joint tax return with their spouse (if your child is married).
6. Qualifying child of more than one person: if the person could be a qualifying child for more than one person, you must be the person entitled to claim them (see above tests).
While you cannot deduct child support payments from your taxable income, your spouse also cannot report the payments as taxable income on their tax return. Contrary to popular belief, child support has little effect on taxes.
My ex-husband has 4 children with his current wife, we have 2 children together, in our divorce papers it states he can claim our oldest child who is 16 and I claim our younger child age 15. Both of our daughters live with me 12 months out of the year, but he does pay child support, since he now has 4 kids to claim with his current wife, can I claim BOTH of my children since they have always lived with me, even though the divorce papers say he can claim one of ours? I hope that made sense.. Thank you.
Hi Amy,
This a very common situation and it is important for parents to know that custodial parent has the right to claim the child as a dependent. The IRS abides by federal law and not state/county court orders. The custodial parent is the parent whom the child lived with for the majority of nights in the year. If the child lived with both parents for an equal number of nights, then the custodial parent id the one with the higher Adjusted Gross Income. If a parent claims a child solely based on a court order without meeting the IRS requirements to claim the dependent, then the actual custodial parent can dispute that and claim the child instead. Now, it is important to know that the IRS is not responsible for “catching” a non custodial parent. You will need to paper file your return and mail it to the IRS with a cover letter and sufficient documentation to prove that you are the child’s custodial parent. Documentation generally includes school/medical/dental records and other forms in which your address matches the child’s address. Keep in mind that this is a time consuming process since it involves the IRS along with both parties (parents). However, if you are the custodial parent, then it may be worth the time.
If neither the mother or father claimed their child in 2014 tax year can they still claim the credit.
Hi Ryan,
The person claiming the child tax credit must also be the individual who is claiming the child as a dependent. This is different for the Earned Income Tax Credit and qualifications to claim head of household. These both do not require that the same person be claiming the child as a dependent.
What if neither parent claimed the child throughout the year? Can you still claim the client come tax time?
Do you have to have made a certain amount throughout the year to be able to claim your child at all?
Hi Cort,
Your W-4 allowances do not determine what you can necessarily claim on your tax return. Ideally, it should reflect your tax return but it is not required that you do so. You can still claim any qualifying dependents that you are entitled to based on IRS rules.
I have four children that qualify for the child credit, but I am not sure what number to put. It says to add 2 to every child, which would be 8. I am not sure if that’s correct. I make less than $70,000 and single.
Hi Stephanie,
When following along with the Personal Allowances Worksheet, you will calculate the maximum amount of allowances you can claim on your W-4 form to abide by IRS standards. Keep in mind that you can always claim less than calculated using that worksheet. Claiming 8 allowances may cause you to have additional tax due to the IRS after filing. Instead, I suggest claiming one allowance for yourself and an additional allowance for each of the dependents you’ll claim on your tax return. This will allow for you to have a bit more in your paychecks while still having a sufficient amount of your income withheld to cove taxes.