Can You Claim the Child Tax Credit?

With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.

A qualifying child for this credit is someone who meets the following criteria:

Age - Was under age 17 at the end of 2008

Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals or other eligible person who lived with you all year as a member of your household

Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.

Support - Did not provide over half of his or her own support

Lived with you - Must have lived with you for more than half of 2008 (note that some exceptions to this criteria exist)

The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:

Married Filing Jointly $110,000
Married Filing Separately $ 55,000
All others $ 75,000

In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. The total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.

Form 8812, Additional Child Tax Credit (PDF 56K)
Publication 972, Child Tax Credit (PDF 128K)
Form 1040 (PDF 176K)
Form 1040 Instructions (PDF 1,101K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Form 1040A Instructions (PDF 428K)
Tax Topic 606
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Five Important Tax Credits

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes.

Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

5. Health Coverage Tax Credit Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

These links will give even more detailed information on the credits and I urge everyone to check them out.....knowledge is power!

1040 Central
Publication 596, Earned Income Credit (EIC) (PDF 281K)
Publication 972, Child Tax Credit (PDF 128K)
Publication 503, Child and Dependent Care Expenses (PDF 167K)
Publication 524, Credit for the Elderly and Disabled (PDF 140K)
Publication 970, Tax Benefits for Education (PDF 368K)
Publication 590, Individual Retirement Arrangements (IRAs) (PDF 449K)
Form 1040 Instructions (PDF 1,101K)

Upcoming Tax Changes for the 2008 Filing Season

The IRS has published changes in legislation which may affect your taxes this year. And let’s admit the inevitable, in a time of recession and economic hardships for all classes of taxpayers, we could all use some tax breaks for the coming filing season.

Take some time to look through the following changes and see if any of these will affect your tax liability reduction.

Additional Child Tax Credit

The income threshold for the Additional Child Tax Credit has been lowered to $8,500 for tax year 2008 only.

0% Capital Gain

The 5% net long-term capital gain rate drops to 0% for those taxpayers who are in the 10% or 15% tax brackets.

Real Property Tax Deduction

Non-itemizers may claim an additional standard deduction for state and local real property taxes paid. The maximum deduction is $500 ($1,000 MFJ).

Refundable First-time Homebuyer

Credit Taxpayers who purchased a principal residence after April 8, 2008, through June 30, 2009, and who have not owned a principal residence in the previous 3 years may claim a refundable credit for 10% of the purchase price. The maximum credit is $7,500 ($3,750 MFS). Eligibility for the credit phases out for modified AGI between $75,000–$95,000 ($150,000–$170,000 MFJ). Note: The credit must be repaid in 15 equal installments starting in 2010. Repayment is accelerated if the home is sold or no longer used as a principal residence.

Recovery Rebate Credit

The rebate that was paid in 2008 will be reconciled on the 2008 tax return. Taxpayers will receive any additional credit due, but don't need to repay any excess credit received.

Kiddie Tax

Kiddie tax now applies to children who are younger than 18, children who are 18 unless they provide more than half of their own support based on earned income, and children who are 19 to 23 and full-time students — unless they provide more than half of their own support based on earned income.

Depreciation

The maximum Section 179 deduction for tax years starting in 2008 has been increased to $250,000. A phaseout of this amount starts when more than $800,000 of qualifying property is placed in service during the tax year. Additional first-year 50% "bonus" depreciation is the default provision for property placed in service in 2008.