The pitter-patter of little feet can fill a home with both joy and responsibilities. It can also reduce tax liability by up to $1,000 per child, if eligible for the Child Tax Credit http://www.hrblock.com/free-tax-tips-calculators/tax-help-articles/Credits/Child-Tax-Credit.html?action=ga&aid=27129&out=vm.
“Claiming this credit is a great way for parents to save money on their tax bill to put toward other things, like paying household bills or even saving for the future,” said Charles Winfiel, Tax Pro for H&R Block.
To qualify, parents must be able to claim children who meet these requirements:
•The qualifying child must be under age 17 at the end of the year and the qualifying child must be one of the following:
•U.S. national (a person born in certain U.S. outlying possessions, such as American Samoa, or born under other, limited circumstances)
For divorced or separated parents, the parent who claims the child as a dependent is eligible to claim the Child Tax Credit. This is true even if the parent’s filing status is married filing separately.
Know the limits
However, the Child Tax Credit has some limitations:
•Taxpayers begin to lose some or all of the credit if their modified adjusted income is more than $75,000 (or $110,000 if married filing jointly or $55,000 if married filing separately)
•The credit is nonrefundable. This means if total tax before the Child Tax Credit is $600, the taxpayer will only get a $600 credit (taking tax down to $0) no matter how many children are being claimed.
•In some cases, taxpayers may qualify for the Additional Child Tax Credit if either of these applies:
•The taxpayer’s earned income is at least $3,000
•The taxpayer has three or more qualifying children.
“In cases where taxpayers’ income may be a little too high to claim the credit, they can often lower their modified adjustable gross income and qualify,” Winfiel said. “Options may include deferring salary into a 401(k) or cafeteria plan or making contributions to a traditional IRA.”
For more information about the Child Tax Credit and other tax breaks, contact a local H&R Block tax professional at 710 East Hwy. 54 in El Dorado Springs.