For tax years beginning after 2017 and before 2026, parents are generally allowed a Tax Credit of $2,000, which may be partially refundable, for each qualifying child.
For purposes of the Child Tax Credit, a qualifying child is an individual who:
(1) is your son, daughter, stepchild, adopted child, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them,
(2) was Under Age 17 at the end of the year,
(3) is a U.S. Citizen, national, or resident,
(4) lived with you for more than Half the Year,
(5) did not provide more than Half of his or her Own Support for the year,
(6) did not file a joint return with his or her spouse for the year (unless it is filed only as a Claim for Refund); and
(7) is Claimed as a Dependent on your return for the year.
An adopted child is treated as a U.S. citizen, national, or resident if he or she lived with you all year as a member of your household. Only one taxpayer can claim a child as a qualifying child for any tax year. If more than one taxpayer qualifies to claim a child as a qualifying child for a tax year, a set of Tie Breaker Rules applies to determine which taxpayer can actually claim the child as a qualifying child for that tax year.
For purposes of the $500 Nonrefundable Credit, a qualifying relative includes:
(1) individuals that have a certain Relationship to You,
(2) whose Gross Income for the year is less than a certain amount, and
(3) for whom you provide Over One Half of that Individual’s Support for the calendar year in which the credit is taken.
As previously noted, you can claim a maximum child tax credit of $2,000 for each qualifying child and a maximum dependent credit of $500 for each qualifying dependent. However, the amount of the credit is phased out if your modified Adjusted Gross Income (MAGI) exceeds a threshold amount. The applicable threshold amount is:
(1) $400,000 if you are Married Filing Jointly, and
(2) $200,000 if you are Not Married Filing Jointly.
The $2,000 child tax credit and $500 dependent credit otherwise allowable for each qualifying child or dependent must be Reduced by $50 for Each $1,000, or fraction thereof, by which your MAGI exceeds the threshold amount.
The child tax credit generally is treated as a nonrefundable credit. Thus, the credit can be used to Offset your Regular Tax Liability and AMT Liability, but you generally do not get a refund for any credit in excess of those amounts. In other words, the child tax credit is limited to the amount of your tax liability for the year.
Although the Child Tax Credit generally is a nonrefundable credit, up to $1,400 of the credit may be refundable if your income is less than a certain amount.
Please call me at your convenience so that we can examine in further detail your eligibility for the Child Tax Credit.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 06292021-01 320-870)