What You Need to Know About Child Tax Credits – CPA Traverse City
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You may be able to reduce your federal income tax by up to $1,000 for each child in your family, under the age of 17.
How do you know if you qualify for the deduction? Here are a few tips to help.
Does you child qualify?
• Was your child 16 or younger at the end of the tax year?
• Do you provide the financial support for this child? If the child provided more than half of their own financial support then you cannot claim them.
• Do you have a formal relationship with the child? Are they your son, daughter (including adopted), stepchild, foster child, brother, sister, grandchild, niece, nephew, stepbrother or stepsister? You cannot claim your significant other’s child that resides with you on your tax return even if you provide full financial support.
• In order to qualify the minor must be a US citizen, resident alien or national.
• Your child must have lived with you for more than half of the tax year in question, with exceptions
• If there were temporary absences because of medical reasons, military, school, business, vacation or juvenile facility
• Your child was born or died during the tax year in question.
• You are divorced or separated
• Your child was kidnapped
If you’re situation fits one of the exceptions make sure to consult your CPA to ensure that you file correctly. Divorced parents often have confusion over who is allowed the child tax credit. For example, a common red flag for divorced couples is when both parents claim the same child on their tax return. Typically the second person to submit their tax form is selected for an audit to determine if they are within their rights to claim the child(ren). If this happens to you, you will need to be able to present documentation proving that you are allowed to claim the child on your return for that year.
Do you qualify?
• Do you earn too much to take the full $1,000 deduction?
• If you are married filing jointly and your modified adjusted gross income is $110,000 or more, or you are single and it’s $75,000 or more you will typically only be allowed a percentage of the total deduction. Consult with your CPA if you fall in this bracket.
• Do you owe less than your total child tax credit?
• You can typically only deduct the up to the amount of tax you owe, but if the amount of total income tax that you owe is less than the amount of your child income tax credit you may be able to claim the Additional Child Tax Credit. Consult with your CPA to see if you qualify.
Do you have questions about child tax credits or other tax concerns? Click Here: CPA Traverse City Michigan to submit your questions to an experienced tax accountant or schedule an appointment for a free initial consultation.