What Is the Child Tax Credit?

You know that a child tax credit is worth more than a tax deduction. That’s because credit is one dollar for the dollar offset by taxes. The Child Tax Credit allows reducing your federal income tax up to $1,000 per child, and there is no any limit to the number of children, as long as they all are under the age of 17 at the end of the year and live with you for more than six years, months (excluding newborns) and a US citizen. So if you have a child, your tax bill can be reduced by $1,000; triplets? Why not think about increasing your family next year and next year? This credit is limited for those with certain incomes, of course.

This was first discussed in the early 1990s. Like most other income adjustments in the tax code, it was passed as social legislation. The size of families was increasing due to the prosperity that President Reagan created, but there were no adjustments to the number of personal exemptions for the number of children, so families were having a hard time paying taxes.

Congress response: You can see changes to the child tax credit, reduce taxes with credits. In 1995, discussions showed that more than 28 million families would benefit from the program and increase the power of those families by $22 million a year (total). The credit significantly benefits the vast majority of blue-collar, working-class Americans.

The original allowance in the 1997 tax law was $ 400 per qualifying child, and increased to $ the year, to $600 in 2001, after to $700, and now to $1,000. In 2013 is slated to drop to $500 per child. Previous legislation also made the tax credit available to family’s fewer than three children.

There are income limitations and gradual elimination. The full credit is reduced when the income reaches:

• $55,000 for married couples filing a separate return,

• $75,000 for eligible single filers, household heads, and widowers, and

• $110,000 for married couples filing a joint return

If your child’s credit exceeds your income tax, the balance may be refundable. The child credit is refundable to the greater of:

15% of earned income over $3,000

For the taxpayers with three and more qualifying children, the taxpayer’s excess social security taxes for the tax year over their earned income credit for the year

But, if you have too many child and dependents tax credit, this credit will be reduced with another tax, the Alternative Tax.

If you don’t have Social Security Number and are not authorized to work in the United States, USA, You are granted an ITIN or Individual Taxpayer Identification Number. You are not allowed to Earned Income Tax Credit or most federal public benefits, you may collect the refundable portion of this credit! Last year, unauthorized workers received $.2 billion in tax credits. In fact, 72% of the tax returns used by ITINs claimed the child tax credit.