The Child Tax Credit is one of the most straight forward tax credits that are available for Americans of all tax brackets. First enacted in 1997 and expanded in 2001, this credit has helped offset the cost of raising an eligible child under the age of seventeen. The credit currently stands at $1,000 per eligible child and there is no limit on the number of dependents who qualify as long as they meet these six standards at the end of the 2014 tax year, but there is a limit on the amount of money a parent can earn in order to receive the full credit of $1,000 per dependent child.
1. The child must be under the age of 17 at the end of 2016
The child tax credit is only available for children under the age of 17 at the end of 2014. If your child or dependent turned 17 on January 1 of 2017 then they are still eligible for the tax credit for 2016, but they are not eligible if they turned 17 on December 31 of 2016. There's no leeway with the dates and the IRS will verify the age of your dependents before you are eligible to receive the credit.
2. The child must meet a specific relationship test
The child you are claiming for this credit must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. You must be able to prove that you are taking care of any of these dependents in order to receive the tax credit.
3. The child must be supported by the individual claiming the credit
This should go without saying, but you must be able to prove that you provide more than fifty percent of the eligible child's support. If the child has a job then they must not pay for more than fifty percent of their own expenses in order for you to qualify for the credit.
4. The child must be listed as a dependent on your Federal tax returns
This should also go without saying, but you must list each dependent child on your Federal tax returns in order to receive the tax credit for a dependent child.
5. The child must be a United States Citizen or resident alien of the United States
Every child you list as a dependent must be a United States citizen, United States national, or a resident alien. A United States national is an individual who was born in American Samoa or in the Commonwealth of the Northern Mariana Islands. You are considered an alien for tax purposes if you if you meet either the green card test
or the substantial presence test
for the calendar year of 2016.
6. The child must live with you for more than half of the year
This requirement mostly applies to parents who share joint custody of their child. The dependent child must live with you for over half of the year in order for you to receive the child tax credit. So if you and your former spouse share equal custody of your children then you will have to have a discussion as to who will claim the tax credit because a child can only be claimed one time.
Additional information to be aware of before filing your taxes
The credit will be smaller than $1,000 if your modified adjusted gross income is above a certain number. The amount depends on your filing status and how much you earned in 2016. Married taxpayers who file a joint return begin getting phased-out at $110,000. Married taxpayers who file separate returns begin getting phased-out at $55,000. And all other taxpayers begin getting phased-out at $75,000. The Child Tax Credit is also generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe. Please consult your tax professional for more information about your eligibility for the child tax credit.