Child Tax Credit: Benefits, Income Limits & Eligibility Details

February 23, 2011 | By: TaxCure Staff

child tax credit 2010The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that was passed late last year extended an eligibility requirement change through 2012 that was created under The American Recovery and Reinvestment Act of 2009. The eligibility requirement change allows workers to claim the credit as long as their income was $3,000 or more. This is what people are referring to when they talk about the “additional child tax credit.” In essence, individuals who are paying no taxes, are eligible to receive a tax refund. So how does this all work?

If you have children, you don’t want to miss claiming this credit on your Federal tax return in 2010 because you can get a credit up to $1,000.00 for each qualifying child. Most tax software solutions or accountants will ask you questions in order to see if you qualify for the regular or additional child tax credit. However, it never hurts to double-check your tax return this year to make sure that if you were eligible that you received the credit. Here are a few details about the Child Tax Credit that will be useful in determining whether you can directly reduce your tax liabilities:

Child Tax Credit Amount?

The child tax credit is up to $1,000 per qualifying child. If you have one child, you can get up to a $1,000 credit, 2 children up to $2,000, 3 children, up to $3,000 credit, and on up.

Child Tax Credit Qualifications?

The US tax code states that in order for your child to qualify they must meet certain qualifying criteria. These criteria are broken down as follows:

  • Age Criteria: In order for you to be able to claim the credit, your child must have been age 16 or under on the last day of 2010.
  • Relationship Criteria: In order to be able to claim a child living in your home, they need to meet one of the following. They must be your own biological child or an adopted child. Additionally, you can also claim the credit for a stepchild or a foster child. Other times when you may be able to claim the credit include when a brother, sister, step-brother or grandchild or any other descendent children lives with you and are under your care. As an additional note to the relationship criteria an adopted child, according to the IRS, is any child that has been placed in your home for legal adoption.
  • Support Criteria: In order for you to claim the child tax credit, you must have provided for the child, during the year, 50% or more support.
  • Dependent Criteria: If you claim the tax credit, you must also claim the child as your dependent on your federal income tax return.
  • Citizenship Criteria: In order to claim the credit, the child you are claiming must be a US citizen or they can also be a US national or a US resident alien.
  • Residence Criteria: In order to claim the credit, the child in question must have lived with you for over half of the year. According to the IRS site, there are some exceptions to this criteria and you can check out IRS Publication 972 to see how else to qualify in this area.

Child Tax Credit Income Limits or Phase Out Schedule?

The credit is limited and in order to qualify for the full amount, you must meet certain earning guidelines. For married taxpayers filing jointly, in order to receive the full credit (or before the credit begins to be reduced), your modified adjusted gross income (MAGI) cannot exceed $110,000, and for married taxpayers filing separately, to claim the full credit, modified adjusted gross income cannot exceed $55,000. For all other filers, the full credit can be received for anyone showing a modified adjusted gross income of $75,000 or less. Taxpayers will lose about fifty dollars for every $1k of MAGI above the thresholds for your filing status.

How to Claim the Child Tax Credit? How about the Additional Tax Credit?

If you intend to claim this tax credit, you need to file Form 1040, 1040A, or Form 1040NR. Any of the “EZ” 1040 forms will not suffice.  In Form 1040, the Child Tax Credit Worksheet is very useful to figure out the credit amount. However, if you find your child's tax credit is higher than what you owe in taxes, utilize Form 8812 to calculate and properly claim the Additional Tax Credit. The additional tax credit is the lower of either what is left of the credit after your tax liabilities are zero, or 15% of taxable earned income over $3k. Parents with three or more children, who earned less than $3k, may be able to get a credit up to what they paid in Social Security, subtracting any EITC (Earned Income Tax Credit) claimed (assuming you paid more in Social Security taxes then you received with the EITC). Check with your accountant when in doubt, or utilize a tax software program to make sure your credit is properly calculated and claimed.