In a recent column, I talked about taking advantage of the earned income tax credit when you file your taxes this year. There is another credit available to families called the child tax credit, or CTC. If you qualify, you can file for both types of credit.
You will qualify for this credit if:
- You have one or more dependent child(ren) under the age of 17 on Dec. 31, 2001.
- Your dependent child is a son, daughter, adopted child, descendant of a child, stepchild or foster child.
- Your income is no more than $110,000 for married filing jointly.
- Your income does not exceed $75,000 for a single, head of household or qualifying widow(er) or $55,000 for married filing separately.
- Your income is less than $32,121 – you also may qualify for the earned income tax credit.
In the case of divorced families, only the parent who claims the child(ren) as dependents can claim the child tax credit. Grandparents, stepparents and foster parents also may take advantage of the tax credit if the ages of the dependent children and income limitations are met.
The child tax credit is worth $600 per child. Each child must have a social security number to allow the taxpayer to claim them for the tax credit. Some children have individual taxpayer identification numbers, or ITIN, and this will qualify the child as well, as long as he or she is living in the United States.
The credit is first used to offset any taxes you might owe. However, if you have earned income greater than $10,000 and claim children, you may get a refund even if you owe no taxes.
Here is an example from Judith Urich, Family Resource Management Specialist at the University of Arkansas, of how a refund would be figured. Sam and Sue are married workers with four children under age 17. The couple earned $25,000 in 2001 and owe no income tax. The total credit is: 4 children x $600 = $2,400. Their refund is computed on 10 percent of the amount that their earned income exceeds $10,000. Ten percent of Sam and Sue’s earnings over $10,000 is $1,500. They would receive a refund of $1,500. Of course, if they owed $2,400 in taxes, the CTC would offset the entire amount and they would receive nothing.
Sam and Sue also would be eligible for a $1,500 earned income tax credit, so they would receive a total refund from both tax credits of $3,000.