Do you have a child under the age of 17? If so, there’s a tax credit you should take advantage of. The Child Tax Credit can save you a ton of money this tax season.
But what is the Child Tax Credit? How do you know if you are eligible? And how much can you save? Read on to learn everything you need to know about the Child Tax Credit.
What is the Child Tax Credit?
The Child Tax Credit is a tax credit that can reduce your taxes owed by up to $2,000 per qualifying child. It is refundable for up to $1400, and begins to phase out above set income restrictions.
Are you eligible for the Child Tax Credit?
To qualify for the Child Tax Credit, the following must be true:
- Your child must have been under the age of 17 at the end of 2018.
- They must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister; or a descendent of any of these individuals, e.g. grandchild, niece, nephew. Legally adopted children also qualify.
- The child must not have provided more than half of their own support for the year.
- They can’t file a joint return for the year, unless they’re only filing to claim a refund.
- The child must be a U.S. citizen, U.S. national or U.S. resident alien.
- They must have lived with you for more than half of 2018.
- The child must have a Social Security Number.
How much can you save?
The Child Tax Credit could save you up to $2000 per child. Better yet, $1400 of that amount is refundable. That means the tax credit won’t just subtract $2000 from your taxes owed — it’ll also increase your tax refund. That’s a lot of savings!
However, the Child Tax Credit does begin to phase out above certain income restrictions. If you are a single parent making more than $200,000, or a married couple filing jointly making more than $400,000, your credit will be worth less than the maximum.
For every $1000 that you make over the income limit, the Child Tax Credit is reduced by $50. That means that if you’re a single parent making $201,000 per year, your credit will be worth $1950. And if your gross income is $220,000, the Child Tax Credit won’t save you any money at all.
How do you claim the Child Tax Credit?
To claim the credit, complete Schedule 8812 (Form 1040) with your tax return.
If you need any more information, view IRS Publication 972.
You can also use the Interactive Tax Assistant tool on the IRS website to check if you can claim the credit.
Filing your taxes can be stressful. Educate yourself on all the credits and deductions available to you to minimize your taxable income and maximize your refund.
Need help? SuperMoney has compiled all the best tax preparation solutions on the market. To get the most out of your tax season, compare tax preparation firms and find the right one for your budget.