Child Tax
Credit
One of the new credits
available is the child tax credit. This
credit gives you $1,000 for each child under
the age of 17, subject to income
limitations. Just for clarification, a
credit reduces your TAX, dollar for dollar,
not your TAXABLE INCOME.
There are 4 "tests" that you
have to pass in order to be eligible for
this credit:
1.
Dependent:
You must be able to deduct
them as a dependent. This includes a child,
stepchild, foster child or descendant.
2.
Age of dependent:
The dependent must be under
the age of 17 on December 31st.
3.
Income
limitations:
If your modified Adjusted
Gross Income (AGI) reaches
$110,000, the credit is limited. Once it
reaches $130,000 the credit is gone.
4.
Income
tax limits:
Since a credit reduces your
tax (not taxable income), you may not get
full benefit of your credit if your tax is
too low. Based on an elaborate calculation
(that I won't bore you with), you may still
be able to get all or part of the unused
credit. (See Code 26(a) for all of the
technical stuff on this calculation).
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