A Guide to Child Tax Benefits

A GUIDE TO CHILD TAX BENEFITS The 2010 Child Tax Credit has been extended through 2011 and 2012. If your child qualifies, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child. In fiscal year 2009, tax credits and tax expenditures accounted for $132 billion of assistance to families with children. THIS CHECKLIST SERVES AS A TOOL то HELP YOU DETERMINE IF YOU QUALIFY: AGE A child must have been under age 17 (age 16 or younger) at the end of the year. RELATIONSHIP A child must either be your son, daughter, stepchild, foster child, brother, stepbrother, stepsister, or a descendant of any of these individuals, which includes your grandchild, niece, or nephew. Note: An adopted child lawfully placed with you is always treated as your own child. SUPPORT The child must not have provided more than half of their own support. DEPENDENT You must claim the child as a dependent on your federal tax return. CITIZENSHIP The child must be a U.S. citizen, U.S. national, or U.S. resident alien. RESIDENCE The child must have lived with you for more than half of the tax year. The credit is limited if your modified adjusted gross income is above a certain amount. The amount varies depending on your filing status. LIMITATI ONS Married and filing a joint return: The phase-out begins at $110,000. 2$ Married and filing a separate return: The phase-out begins at $55,000. For all other taxpayers: The phase-out begins at $75,000. OTHER TAX DEDUCTIONS AND CREDITS FOR FAMILIES WITH CHILDREN 2011 Value Child O Age Limit Income Threshold KEY DEPENDENT EXEMPT I ON $3,700 exemption times marginal tax rate (between 0 and 35 percent) per qualifying child Under 19 (under 24 if student for at least 5 months) None EARNED INCOME TAX CREDIT* Maximum credit: 1 child: $3,094 2 children: $5,112 3 children: $5,751 A Under 19 (under 24 if student for at least 5 months) AGI (or earned income) Obelow $36,052 with 1 child, $40,964 with 2 children, $43,998 with 3 children ($5,080 higher in each category for joint filers) CHILD AND DEPENDE NT CARE TAX CREDIT None, but credit level varies with income: If AGI is less than $15,000 tax- 20-35% of up to > 3,000 in child care expenses for one child and up to 6,000 for more than one qualifying child depending on household AGI (max credit is $2,100). Under 13 payer receives 35% (of up to $3,000 in child care expenses). Then credit decreases 1% for every $2,000 in additional AGI (if AGI is higher than $43,000 it's 20% credit in childcare expenses LIFETIME LEARNING CREDIT Household with eligible 20 percent of tuition and fees for any post- secondary education; maximum of $2,000 for the household Must be taxpayer's dependent expenses up to AGI of $61,000 ($122,000 joint return); phased out for AGI between $51,000 and $61,000 ($102,000- $122,000 joint return) AMERICAN OPPORTUN ITY TAX CREDIT Up to $2,500 spent on tuition, fees, and course materials per student in their first four years of post- secondary education Must be taxpayer's dependent Household with eligible expenses up to AGI of $90,000 ($180,000 joint return); phased out for AGI between $80,000 and $90,000 ($160,000- $180,000 joint return) APPLIES TO ALL TAX CREDITS: • Child must not provide more than half of his/her own support • Relationship test: Taxpayer's child, stepchild, foster child, sibling, step sibling, or a descendant of one of these • Same principal residence as taxpayer for at least 6 months • Child doesn't have to be a U.S. citizen/national/resident, can also be a resident of Canada or Mexico *No support requirements SOURCES: IRS.GOV, 2011 I TAXPOLICYCENTER.ORG, 2011 TurboTax Choose Easy.