Raising a child these days often requires a big cash outlay. You might, however, be able to get some of that money back when it comes time to file your tax return.
The Child Tax Credit could save you up to $1,000 — for each qualifying child — every tax year. The child tax credit is nonrefundable, meaning if your credit is bigger than your tax liability, your tax bill is reduced to zero.
Learn who’s eligible for the Child Tax Credit, how much it is and how to claim it. Review these six things you need to know about the child tax credit so that you don’t miss out on a deduction you’re entitled to take.
1. Qualifying Child Requirements
To qualify for the Child Tax Credit, a child must meet several requirements. See if your child meets these conditions:
- Your child must be 16 or younger at the end of the year.
- A qualifying child can be your child, stepchild, foster child, sibling, stepsibling, half sibling, or a descendant of one of them, such as your grandchild, niece or nephew.
- The child must live with you for more than half the tax year. Exceptions apply, however, if he lives at boarding school or somewhere else for medical care.
- The child cannot pay for more than half of his own expenses.
- You must claim the child as your dependent on your tax return, and he can’t file a joint return except to claim a tax refund. For example, if your child is married and isn’t exempt from filing a return with his spouse, you can’t claim the child tax credit.
- The child must be a U.S. citizen, U.S. national or U.S. resident alien and have a Social Security or individual taxpayer ID number.
2. Tiebreakers If Multiple People Can Claim a Child
Only one person can claim a child. If more than one person is eligible to claim him, the IRS uses these tiebreaker rules to determine who can claim the credit:
- The child’s parent or both parents if they file jointly.
- The parent with whom the child lived most during the year.
- The parent with the highest adjusted gross income.
- If no parents can claim the child, the person with the highest adjusted gross income.
3. Child Tax Credit Amount for 2016
How much is the child tax credit for 2016? The maximum Child Tax Credit for tax year 2016 is $1,000 per qualifying child. The credit phases out, however, if your modified adjusted gross income is too high, depending on your filing status.
For example, if you’re married, the credit phases out starting at $110,000; and if you file as single or head of household, it starts phasing out at $75,000. You calculate your modified adjusted gross income by adding certain earned income exclusions to your adjusted gross income.
4. How to Claim the Child Tax Credit
First, make sure your child is eligible. When you file your income taxes, use Form 1040 or Form 1040A to claim the credit. If your qualifying child has an ITIN instead of a Social Security number, you will also need to file Form 8812.
5. Additional Child Tax Credit
The Child Tax Credit isn’t refundable, which means if you have a lower tax liability than the amount of the credit you won’t receive the credit as a refund. You might qualify for the additional Child Tax Credit, however, which is refundable as long as you don’t have any foreign earned income and you file Form 8812.
For instance, if you have two qualifying children and your income doesn’t limit your Child Tax Credit, you would be eligible for a credit of $2,000. If your tax liability is only $1,500, though, you could claim a $1,500 Child Tax Credit and claim the additional Child Tax Credit in the amount of $500.
6. Don’t Include Child Care Expenses
Unlike the child and dependent care credit, you don’t have to show you had any child care expenses — like after-school care — to claim the Child Tax Credit. The amount of the Child Tax Credit is fixed regardless of your expenses.
Keep Reading: Tax Breaks for Single Parents
Jamie Young contributed to the reporting for this article.