Are You Eligible to Take the Child Tax Credit?

Raising a child can be a huge expense on the family pocketbook. Websites that offer calculators to estimate the cost place the total expenditure at somewhere between $200 and $300 thousand, not including any post-high school academia.

With that in mind, it’s good to know that the IRS offers some of that cash back in the way of the Child Tax Credit.

Who is eligible for the credit, and what is the maximum amount available through this credit?

The maximum amount of credit available is $1,000 per qualifying child. If you have no taxable income, then you cannot take this credit. The Child Tax Credit reduces your tax dollar for dollar, but it is not a refundable credit, like the Earned Income Tax Credit. If your tax due is zero, you cannot take this credit because there is no tax to reduce.

However, if you qualify for the Additional Child Tax Credit, then you may receive some of the credit in the form of a refund. For a worksheet that will determine if you are eligible for the additional credit, see the link below to Publication 972.

You will need to complete Form 8812 if you are claiming the Additional Child Tax Credit.

If your gross income is above certain thresholds, you may be required to reduce the credit. For tax year 2010, these thresholds stand at $110,000 for couples filing jointly. If you choose to file separately from your spouse, only one of you can take the credit, and the earned income must be under $55,000 for that spouse.

Single and Head of Household filers must reduce the credit if they earned more than $75,000.

The rules for a qualifying child are similar to those to claim a dependent, but they are not identical. You may have a dependent who does not qualify for the Child Tax Credit but all qualifying children for the Child Tax Credit must also be your dependents.

Qualifiers for the purposes of the child tax credit are:

1. The child must be a US citizen and related to you; your son, daughter, brother or sister. Step-sons and daughters also qualify, as do foster children. Grandchildren, nieces and nephews also are eligible. Adopted children are always treated as your own child for tax purposes; they qualify as well.

2. The child must be under age 17 on December 31 of the tax year.

3. You must have provided more than half of the child’s total support during the year.

4. You must be able to claim the child as a dependent on your tax return.

In order to claim the credit, you must file Form 1040 or 1040-A. You cannot use the 1040-EZ since that form does not accommodate any dependents.

For more information, see IRS Publication 972, Child tax Credit.

More from this Contributor:

Am I eligible for the Earned Income Tax Credit?

What income does the IRS consider taxable?

Tax filing requirements for retired taxpayers