Hello everyone,
In today's session, let's talk about another important tax topic: the Child Tax Credit.
This is another great tax benefit, where one can lower the tax bill by upto $1,000 per child! Remember, a tax credit reduces the tax bill dollar-for-dollar (as opposed to a tax deduction which only reduces your taxable income). Sounds great, right? It is, if the child can be found eligible and here are the requirements.
Age: the child must be 16 years old or younger by the end of the tax year for you to claim the credit
Citizenship Test: the child must be a U.S. citizen, a Permanent U.S. resident, or a U.S. national
Residence: the child must have lived with you for more than half of the tax year
Income Test: there is a phase-out based on your filing status and income level. That means that tax benefits go away if you make too much money over a certain threshold. For example, for a married couple filing joint, the threshold is $110,000 and every 1,000 dollars over the threshold will reduce the tax credit by 50 dollars.
Support Test: the child must not have provided more than 50% of his/her support
Relationship: the person must be your child/stepchild/foster or adopted child/sibling/niece/nephew or a grandchild
Dependency: the taxpayer must be able to claim the person as a dependent on his/her tax return
If you are interested in the fine-print, see IRS Schedule 8812: Child Tax Credit.
If you are not sure about something, as always, I am here to help. Feel free to reply with your questions and I will guide you in the right direction. Thanks for reading!
Also please check out my previous posts below:
Tax Series #9: Standard Deduction vs. Itemized Deduction
Tax Series #8: Child Support vs. Alimony, and Why it Matters!
Tax Series #7: Top Tax Tips to Save Money
Tax Series #6: Tax Benefits for Students
Tax Series #5: Do you need to file an income tax return every year?
I also started a new series on personal finance below:
Personal Finance Series #2: Top Money-Saving Tips
Personal Finance Series #1: Money Management 101
About the Author : I am a cryptocurrency enthusiast and a U.S. Certified Public Accountant with over 15 years of experience in accounting, taxation, and finance.
If you like this series, please follow me @qwesttexas. I am here to help the Steemit community with tax questions and break down confusing tax jargon into plain English so that we can all benefit from it. Let's go Steem!