Parents have great hopes from their kids. They expect that their children will be a great asset to them. But they can be a type of credit to the parents as well!! If you, as a parent, want to really see your kids as a credit to you, then you will have to wait till the tax time.
What is this tax credit all about?
You will be glad to note that the popular $1,000-per-child tax credit was made a permanent part of the tax code under the American Taxpayer Relief Act or the "fiscal cliff" tax bill, as it is popularly known. This is great news for parents as it will help them reduce their tax bills easily. Moreover, parents find this easy because, they won’t have to keep any extra records or file any separate forms in order to claim this tax credit. The only thing that the parents need to do is to enter the correct amount on their 1040 or 1040A form. However, if you are entitled to additional child tax credit, then you may have to fill out some additional paperwork.
What are the basic requirements to get the tax credit?
The Internal Revenue Service (IRS) will let you claim the tax credit only when you and your kids clear certain tests. One of the basic requirements to claim the tax credit is that your kid should be 16 years or younger in age at the end of the tax year. But the best part is that the child doesn't have to necessarily be your child. Any child can qualify in the eyes of the IRS who is:
• Your sibling (either full or step)
• A descendent of one of these relatives like grandchild, niece or nephew
• Your kids (by birth, adoption, etc).
Apart from this, the IRS will also look into the amount of income that you provide for most of the child's care when they consider you for the tax credit.
When does the tax credit begin to phase out?
The tax credit will phase out when:
• You make $110,000 and are married, filing a joint return
• You earn $75,000 and file as head of household
• You are single or qualifying widow or widower; or make $55,000
• Married-filing-separately taxpayer
It should also be noted here that if you take other credits, then it will also have an impact on the child tax credit that you can claim.
How to claim extra credit?
Well, you should note that this tax credit is nonrefundable. Thus, though your tax bill will get erased, but it won't get you a refund. Well, the parents could possibly get an additional child tax credit up to the amount of Social Security taxes paid in the year minus any earned income credit they received.
In order to calculate your tax credit, you'll have to complete a work sheet and fill out Form 8812 which you need to attach with your individual tax return.