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Home » Jobs & Money » Tax Tips » What Is The Child Tax Credit?

What Is The Child Tax Credit?

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Want to save $1,000? Do you have children? A Child Tax Credit is available to most taxpayers for each “qualifying” child.

The Child Tax Credit is a flat $1,000 reduction in the amount of tax you owe the IRS.

A qualifying child is a child who is under 17 and is one of the following:

  • Your son or daughter
  • Your stepson/stepdaughter
  • Your grandchild or eligible foster child that you are able to claim as a dependent

Here’s more about who is considered a qualifying child.

However, the Child Tax Credit is phased out for people whose income is greater than $110,000 (married) or $75,000 (single or head of household). This phase out means that for every $1000 over the income threshold, you lose $50 off the $1,000 credit.

Example #1: Steve and Ann are married and have 3 dependent kids under the age of 17. Their combined income is $100,000. The amount of the tax credit they can claim on their tax return is $3,000.

Example #2 : Steve and Ann are married and have 3 dependent kids ages 12,15,18. Their combined income is $120,000. Because one of their kids is over 17, they can no longer claim him for a tax credit. Also, because their income is over $110,000 their tax credits is phased out as follows:

$120,000-$110,000 = $10,000
$10,000/$1,000 = $10
$10 x $50 = $500
$2,000 – $500 = $1,500
Therefore, the total amount of their Child Tax Credit is $1,500.

The Child Tax Credit is a simple and easy way to save a few bucks each year when tax time rolls around.

Alix
Alix

Very few people use the words fun and taxes together… and don’t worry, I’m not one of them. I hope to make taxes easier to understand and less of a hassle. I am a CPA with a Master’s in Accounting, and I’ll do my best to help explain many of the tax options available today.

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Filed Under: Jobs & Money, Tax Tips Tagged With: childcare, tax credits and deductions

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LynnetteWith input from Financial Advisors, (a Tax Accountant and an Investment Manager), I share helpful tips regarding money and finances -- including debt relief, insurance, budgeting, and investing for retirement. My goal is to help you save more, spend less, and invest for the future by sharing honest, tried & true budgeting tips and tools. When I'm not saving for the future and helping others save for theirs, you can find me at the corner of Good News & Fun Times as publisher of The Fun Times Guide (32 fun & helpful websites).

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