An additional tax cut that parents with minor children will continue to enjoy for the next five years is the $1,000 Child Tax Credit. This was set to expire in 2012, but has been extended. This credit only applies to taxpayers who can claim their child as a dependent and who meet all of the Child Tax Credit requirements.
There is not a limit to the amount of children you can receive credit for, but if you have more than 4 children you may want to check to see if the Alternative Minimum Tax (AMT) is a better fit for you.
What Are the Child Tax Credit Requirements?
- You must be the child’s legal guardian.
- The child must have lived in your home for more than 6 months of the tax year.
- The child must be under the age of 17 at the end of the tax year.
- The child may not financially contribute to more than half of their living expenses.
- The child must be a citizen or resident alien of the United States.
- The child must be younger than you.
- You must be the child’s parent, legal guardian, or have a higher AGI than both parents.
- If you make more than $55,000 if you are married and filing separately, $110,000 if married and filing jointly, or $75,000 if single, head of household, or qualifying widow/widower you have to reduce $50 for the tax credit for each $1,000 earned.
Is This Credit Refundable?
In most cases when your combined tax credits and deductions reduce your tax to zero, you will not receive a tax refund, but this is not necessarily the case with the child tax credit. If your credit reduces your tax liability to zero you can complete the Additional Child Tax Credit form for a refund of up to:
- 15% of any earned income for tax payers with 1-2 children or the unused amount of the Child Tax Credit—whichever amount is less.
- The same 15% mentioned above for tax payers with 3-4 children OR the total of Social Security and Medicare taxes paid minus earned income credit.
To ensure you are getting the most benefit, visit TurboTax for 2014 and get the largest refund possible.