You probably know about the Child Tax Credit, but you might not be aware of additional tax relief that is currently being provided to low income parents with more than two children. The American Reinvestment and Recovery Act of 2009 allows low income tax payers with qualifying children and income to receive an additional child tax credit for 2009 and 2010, and that tax credit will be refundable. Which means that, the amount of your credit will not only wipe out your tax liability, but the difference in credit will be refunded to you as a tax refund check. This is not always the case with tax credits; often, if your tax credit exceeds the amount you owe, the difference is not given back to you. However, this refundable credit means you may be eligible for a refund even if you did not pay any taxes.
To qualify for this low income credit, you must have qualifying dependent children and an income within the bracket of $3000 to $8500 per year. For tax years 2009 and 2010, this represents a much lower threshold for the additional child tax credit (reduced to $3000 from $8500 in 2008), and this will enable taxpayers in this bracket to receive a greater refundable tax credit than ever before. If you qualify, you can receive a refund for as much as $825.
Here’s how it works: If the amount of your Child Tax Credit exceeds the amount of income tax you owe, you may be able to claim the difference, or some portion of it, as an “Additional” Child Tax Credit. The nature of the refundable credit means that you may be eligible to receive a refund, even if you do not owe any income tax.
The total amount of the Child Tax Credit , as well as any Additional Child Tax Credit, may not exceed a $1,000 maximum per qualifying child.