When filing tax, in addition to the Child Tax Credit, you may also claim a dependency exemption on your federal income taxes for any child who is living with you, or a dependent relative. As long as your dependent receives at least 50 percent of his or her support from you, and meets certain income requirements, you may claim that person as a dependent.
What's the difference between a credit and an exemption? Tax exemptions reduce the amount of your payable income on your tax return. The amount varies each year but in 2008, one exemption will be the equivalent of $3,500 tax deduction. That exemption is expected to rise to $3,650 in 2009. You can take a tax deduction for each qualifying child, if your child meets the criteria for dependency.
A child does not need to live with you full-time in order to qualify as your dependent. However, even if you provide financial support for a child that does not live with you, you still may not be able to claim that child as a dependent. In the case of divorce or separation, the parent who has custody of the child for the greater part of the tax year generally is able to claim the child as his or her dependent for tax purposes, regardless of who provides the greater portion of the financial support. That parent is considered the "custodial parent," and only gives up the right to claim the child as a dependent under certain specific circumstances.
In order for any parent to claim a dependency tax exemption for their child, the child must have a Social Security number. These days, most hospitals will have you fill out the appropriate paperwork for your child's social security number when the child is born; however, if you don't have one, you can obtain a social security number for your child at the Social Security Administration office by filing an SS-5 form. It generally takes about two weeks for you to receive your child's social security number after you submit your application.
