It is expensive to raise a child. And parents, many times, find it challenging to get the money to take care of their kids. Tax season, however, provides a chance for parents to recoup some of these costs.
The federal governments have made several tax deductions available for parents with dependent kids. Some of this deduction applies to daycare costs while others apply to higher education costs. The child tax credit, however, does not require a parent to have any specific cost. If you are wondering how you can claim your child tax credit, this article will guide you.
With a worth of up to $2,000 per child, the child tax credit applies to a child that meets the following requirements: The child must be
You must also have an earned income of at least $2,500 in addition to the criteria above. The earned income could be wages or salary from any employment. You can only claim this once per child in a tax year.
For the case of a separated parent, for instance, in which both of them can qualify to claim the credit, only one of the parties can claim the child. Should both parents try to claim the tax credit for the child, IRS will come in with the tax breaker rule to figure out who qualifies to claim the dependent. You can check publication 501 for details on the tiebreaker rule.
Part of the aims of the Child Tax Credit is to help struggling parents. As a result, you might not qualify if you earn higher incomes. A single taxpayer with an adjusted gross income of more than $200,000, or taxpayers married with an adjusted gross income (AGI) of more than $400,000 will get their credit reduced by 5% of their adjusted gross income (AGI).
With an adjusted gross income (AGI) of more than $240,000 as a single filer or $440,000 for married couples, you do not qualify for the credit.
Being a tax credit, CTC involves a dollar to dollar reduction in what you should pay as tax. Should the child tax credit be more than the taxes you owe, you can have as much as $1400 as a refund. This is called the additional child tax credit (ACTC).
Should you forget to claim the child tax credit any time and you are qualified, there is a provision in which you will amend your original tax return for up to three years. This can qualify you for a refund on the excess tax you paid.
You can claim the child tax credit for dependents on Line 13a of your 2019 Form 10040. There is a worksheet in IRS publication 972, which helps you deduce your allowable credit. If you qualify for the additional child tax credit, you should fill schedule 8812 and submit it with form 1040.
Some states offer a complimentary child tax credit, which can lower your state income tax. You could get a refund on this credit in some states while it is impossible in others. The best bet to understanding the available tax credit in your state is to check out the state by state guide.
It is quite expensive to raise a kid. As a result, you should grab any opportunity in the form of tax benefits that could help reduce your tax bills. According to the nonpartisan Tax Policy Center estimates, about $130 billion is disbursed as child credit to families with kids. With this, be sure to get familiar with the rules and claim it if you qualify.
