Q: Tax Playa, could you tell me how the child tax credit works?
Brian, Washington DC
A: The child tax credit is essentially a booster to the child dependency deduction that is means-tested. It results in giving a disproportional personal exemption compared to adults and non-qualifying dependents...
For more information on the child tax credit, consult IRS Publication 972, Child Tax Credit.
The child tax credit is $1000 per qualifying child.
A qualifying child must meet the following requirements:
- Is a blood relative or a foster child
- Is under age 17 at the end of the year
- Provided a minority of his own support
- Lived with the taxpayer for a majority of the year
- Was a U.S. citizen or resident
The credit is not refundable unless you are low-income.
Approximately $1 of the credit phases out for every $20 that AGI exceeds the following limits:
- Married Filing Jointly: $110,000
- Single, Head of Household, Qualifying Widow(er): $75,000
- Married Filing Separately: $55,000
If you are sufficiently low-income, part or all of your child tax credit can become refundable. Specifically, it is refundable in 2007 within an AGI phaseout range of:
- $11,750-$17,670 for one child
- $11,750-$24,340 for two children
- $11,750-$31,010 for three or more children
If your income is less than $11,750, the earned income credit is assumed to be sufficiently-generous. Essentially, this extends the earned income credit for families with children. It would be far easier to simply change the earned income credit, but that would be too easy.
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