Having children can be a blessing in many, many regards. And of course it can be a curse in others. Our government acknowledged the virtue of raising children and the burden it can bear on the parents.
Because of this, they enacted a credit many years ago for personal income taxes for every qualifying child a taxpayer has.
Manny writes in: “Mike, I hear there a lot of changes this year for the Child Tax Credit and I want to make sure I’m not getting screwed over by the changes. I have three kids and have always benefited from the credit and the exemptions. Any help you can give is appreciated. Thanks.”
Thank you for writing in, Manny. The Child Tax Credit is one of the more popular tax credits we write about because of how many people it affects. We’ll start with the general eligibility requirements and then talk more specifically about the phaseouts and limitations.
In order to claim the Child Tax Credit, you must have a child that qualifies as your dependent and is also under the age of 17 at the end of the tax year.
This is important and should not be confused with the tests for a qualifying child for a dependency, which the general rule for that is under age 19, not 17.
Now for the phaseout ranges: under the new rules, the phaseout for single folk is $200,000 MAGI ($400,000 MAGI for married filing jointly).
The credit phases out $50 for every $1,000 of MAGI over the threshold until the taxpayer is no longer able to benefit from it.
Because of the high MAGI limitations, most taxpayers are eligible for a sizable portion of the Child Tax Credit.
Now for how much you can get back under the new rules: the Child Tax Credit is worth up to a $2,000 reduction of tax liability for every qualifying child.
If the amount of the credit reduces your tax liability below $0, you may also be able to claim a refundable credit known as the Additional Child Tax Credit.
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This article should not be considered legal or tax advice. Always consult a professional for your specific situation.