Thinking Out Loud

7 Requirements for the Child Tax Credit

By Marc Young

We get a lot of questions relating to the Child Tax Credit so here's a quick look at the rules...

1. Age Test: To qualify, a child must have been under the age of 17 (i.e., 16 years old or younger) at the end of the tax year.

2. Relationship Test: The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency (an adopted child is always treated as your own child). You can also claim your brother, sister, step-siblings, and their dependents (nieces, nephews, grandchildren, etc) if they meet all the other tests. You CANNOT use a boy/girl friend's child/ children for the Child Tax Credit (but they may qualify you for other credits or deductions).

3. Support Test: To qualify, the child cannot have provided more than half their own financial support during the year.

4. Dependent Test: You have to claim the child as a dependent on your tax return. To qualify as a dependent there are four general tests the person must meet, which we won't get into much here.

5. Citizenship Test: Child must be a citizen, national, or resident alien.

6. Residence Test: The child must have lived with you for more than half the tax year (some exceptions can apply).

7. Family Income Test: The credit is reduced if your modified adjusted gross income exceeds certain amounts, based on your filing status.

Keep in mind that the Child Tax credit is nonrefundable, meaning it might lower your tax liability but doesn't give you any money back. The Child Tax Credit is often confused with the Additional Child Tax Credit that may be refundable, but isn't guaranteed. You can find out if you're eligible for this refundable credit by completing the worksheet in IRS Form 8812 or by contacting Industry Standard!

Good luck, and Happy Tax Season!

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