Federal Income Tax Child Tax Credit

Many People Can Take a $1000 Credit Per Child on Their Federal Taxes

Jan 2, 2009

The U.S. Federal Government allows individuals and married couples with qualifying children to take a tax credit of $1000.00 per child on their annual tax returns.

A tax deduction reduces the amount of taxes you owe to the federal government. This is different than an income deduction, which reduces your income and therefore will proportionately reduce your tax liability. The Child Tax Credit is a tax deduction and allows people to directly reduce the amount of taxes owed based on the number of qualifying children they have. This credit is “nonrefundable” which means that if the amount of taxes owed is less than the tax credit, the taxes due will be reduced to zero, but the tax credit cannot provide an increase in a tax refund.

What is a Qualifying Child?

According to the Internal Revenue Service, a qualifying child must meet the following criteria:

The child could be directly related to you, such as son or daughter (includes adopted children) or be the child of a spouse, such as stepson or stepdaughter. If you are the legal guardian of a child, such as a child placed with you for adoption before the adoption is final or if the court (or an authorized placement service) has granted you legal custody of your brother, sister, stepbrother, stepsister or foster child or a descendant of any such person. (Beginning with 2009 tax returns, the child must be a dependent and must be younger than the person filing the tax return and claiming the child tax credit.

The child must have lived at the same physical address as you for at least 6 months.

You must have provided one half or more of the financial support of the child for the reporting tax year.

The child must be a citizen or resident of the United States or a U.S. national.

There may be some exceptions to the above qualifications due to divorce or separation of the parents. Internal Revenue Service publication 501 explains the exceptions.

Income Limits

Every person with a dependent child that qualifies for a tax credit is eligible to claim the dependent, however, depending on income limits, not all people will receive the entire $1000.00 credit.

Taxes owed to the federal government will be reduced for households with incomes below the following:

The tax credit is reduced by $50.00 for every $1000 of income above the income limits.

The Internal Revenue Service provides addition information on the Child Tax Credit in publication 972.

“Got Kids”, 2007, Publication 3965, Internal Revenue Service, U.S. Government

The copyright of the article Federal Income Tax Child Tax Credit in Family Finances is owned by Eileen Bailey. Permission to republish Federal Income Tax Child Tax Credit in print or online must be granted by the author in writing.