How can I use a child tax credit?

By Denise Appleby AAA
A:

You may be able to reduce the amount of taxes you owe by up to $4,000, by claiming the child tax credit of up to $1,000 for each qualifying child. For the purposes of the child-tax credit, a qualifying child is defined as follows:

  • Your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of them (for example, your grandchild),
  • Who was under age 17 at the end of 2006,
  • Who did not provide over half of his or her own support for 2006,
  • Who lived with you for more than half of 2006 and
  • Who was a U.S. citizen, a U.S. national, or a resident of the United States.

Inevitably, there will be cases where more than one taxpayer is eligible to claim the same child. If you happen to be one of these individuals, and you are a parent of the child and the other person is not, then the tax credit is claimed on your return. In other cases, refer to the instructions for Form 1040, lines 53 and 6c, or Form 1040A, lines 33 and 6c for guidance on determining which of the two taxpayers is eligible to claim the tax credit.

Some general tips for claiming the child-tax credit include the following:

  • It cannot be claimed on Form 1040EZ. It can be claimed on 1040 and 1040A.
  • It is in addition to the credit for child and dependent care expenses, and the earned income credit.
  • The amount of credit for which you are eligible can be determined by using the formula provided in IRS Form 8812.

Detailed information on the child-tax credit, including income limits, is available in IRS Publication 972.

To read more frequently asked tax questions, see How do I get credit for my retirement plan contributions?, Common Tax Questions Answered and Which is better for tax deductions, itemization or a standard deduction?

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA

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