It's important for parents to apply for a child tax credit from the IRS when filing a federal income tax return. It is not a tax deduction. This would simply permit a parent to decrease their taxable income. The child tax credit actually decreases a parent's tax liability. It cannot decrease the amount of tax liability beyond zero. In some cases, parents have been able to decrease their tax liability by as much as $1,000 for each child that qualifies.
Age and Relationship
To qualify, a child cannot be more than 17 years old at the end of the tax year. The child a parent claims must be a daughter, son, stepchild, foster child, sibling, step-sibling, grandchild, nephew, or niece may also qualify. Adopted children qualify as well.
Support and Dependence
A child who provides over 50 percent of their own financial support for a given tax year won't qualify. To qualify, a child must be claimed as a dependent on the parent's federal income tax return.
Citizenship
In order to receive the child tax credit, the child has to be a citizen of the United States. They can also be a U.S. resident alien or U.S. national. IRS publication 519 provides information on citizenship requirements. It is the U.S. Tax Guide for Aliens.
Residence
The child is usually required to have lived with a parent for at least six months of the tax year to be claimed. A child can also be determined to have lived with a parent for more than half of the tax year if the child was born or died during the year. The parent's home must have been where the child resided for over six months during the year.
Temporary Absence
A child may still be able to be claimed for a child tax credit even if they resided away from the parent's home for a period of time. They must have been temporarily absent because of special circumstances. This could include everything from medical care, vacation, incarceration at a juvenile facility, school, or military service. Exceptions are also available for children who were kidnapped.
Family Income
The child tax credit can be decreased. This will depend on the family's adjusted gross income on their federal tax return. A decrease will happen if your income exceeds certain limits. The decrease limits are $55,000 for married couples who file separate tax returns. It is $75,000 for a single person, head of household, or a widow or widower who qualifies. A married couple filing a joint tax return will have a limit of $110,000. Every $1,000 of income over the limit will decrease the amount of a child tax credit by $50.
