Use Child Tax Credit For Tax Savings

Use Child Tax Credit for Tax Savings
Now,​ here’s a​ real tax savings to​ the​ individual taxpayer with dependents .​
the​ child tax credit is​ a​ direct federal income tax credit based on​ the​ number of​ dependent children in​ your family .​
This federal tax credit is​ available to​ provide credit to​ taxpayers with income below certain established levels .​
Started in​ 2003 and going to​ 2010,​ the​ maximum credit per child is​ $1000 and is​ first applied to​ reduce or​ eliminate the​ taxpayer’s federal tax liability .​
in​ 2011,​ the​ Sunset Provision will decrease the​ tax credit unless the​ credit is​ extended or​ made permanent .​

How does this federal tax credit work and who qualifies for this credit? Well,​ let’s start with the​ last question first .​
Every family with children qualifies,​ however the​ federal tax credit phases out when income is​ above $110,​000 for married filing jointly,​ $75,​000 for single,​ head of​ household,​ or​ widow,​ and $55,​000 for married filing separately .​
in​ addition,​ the​ child tax credit might be limited by the​ amount of​ income tax you​ owe as​ well as​ any alternative minimum tax you​ might owe .​
But like everything else in​ this world,​ there are exceptions .​
If the​ amount of​ your child tax credit is​ greater than the​ amount of​ federal income tax you​ owe,​ you​ may be able to​ claim a​ portion or​ all of​ the​ difference as​ an​ additional Child Tax Credit .​

First exception: if​ your earned income exceeds $10,​750,​ you​ may be able to​ claim up to​ 15 percent of​ that amount .​
Second exception: if​ you​ have three or​ more qualifying dependent children in​ your family,​ you​ may claim up to​ the​ amount of​ Social Security taxes you​ paid during the​ year,​ minus any Earned Income Tax Credit you​ received .​
If you​ qualify under both these exceptions,​ you​ receive the​ greater of​ the​ two amounts,​ up to​ the​ difference between your federal tax liability and your regular Child Tax Credit .​
you​ may want to​ seek a​ tax professional for help with this credit.
Now,​ to​ answer the​ how does it​ work aspect; the​ best approach might be to​ simply break down the​ requirements,​ and explain each fully .​
the​ child tax credit is​ the​ responsibility of​ the​ Internal Revenue Service (IRS),​ and the​ credit issuance is​ determined through the​ federal tax returns the​ individual taxpayer completes each year .​
Taxpayers must complete either the​ 1040 or​ the​ 1040A and the​ IRS form 8812 .​
the​ IRS will then determine eligibility,​ and process accordingly; the​ requirements and limits change each year,​ so the​ individual’s eligibility may change each year.
In order to​ qualify,​ a​ family must have earned at​ least $10,​500 in​ income,​ and that figure will rise each year,​ according to​ inflation .​
There must also be at​ least one qualifying child .​
in​ order to​ be classified as​ a​ qualifying child,​ the​ child must meet the​ following requirements: under age 17 of​ the​ tax year,​ claimed on​ your tax return as​ a​ dependent,​ must pass the​ relationship test (son,​ daughter,​ stepchild,​ grandchild,​ brother,​ sister,​ foster child,​ adopted child,​ etc.),​ be a​ US citizen or​ a​ resident alien,​ and have a​ social security number.
During its original year of​ inception,​ many families with qualifying children were mailed an​ advance federal income tax credit of​ either $300 or​ $400 dollars; but they were also told this would reduce their end-of-year tax credit,​ dollar for dollar .​

The method used for determining the​ tax credit is​ fairly simple,​ and is​ not difficult to​ calculate; however,​ any individual taxpayer with uncertainty should seek the​ advice and assistance of​ a​ tax professional when preparing their federal tax return .​

The credits,​ as​ stated earlier are claimed when you​ complete a​ 1040 or​ 1040A and file your returns with the​ Internal Revenue Service .​
Although many individual taxpayers pay for a​ professional to​ complete their federal tax returns each year,​ there are qualified preparers that are available free of​ charge each year,​ through the​ IRS; either way,​ make sure that you​ communicate your qualifications for the​ child tax credit,​ and check your tax return to​ see that the​ credit was applied .​
you​ do not want to​ let this tax credit slip by.
The child tax credit,​ along with the​ Hope and Lifetime Learning credits are a​ direct means to​ affect the​ individual taxpayer’s tax liability and offer some level of​ tax relief .​
This is​ meant to​ help parents with the​ costs associated in​ raising children,​ and educating them .​
Most often,​ the​ child tax credit is​ a​ way to​ alleviate the​ existing federal tax liability for middle-income taxpayers .​
For the​ extremely low income families,​ there is​ often no income tax due,​ so there is​ no allowable tax credit .​
Although it​ does not help the​ poverty level families as​ a​ form of​ federal income tax refund or​ tax-free income,​ it​ does help to​ alleviate any federal tax liability .​
the​ Earned Income Credit is​ used by many poverty level or​ low-income families as​ a​ supplement to​ their earned income.
Use Child Tax Credit For Tax Savings Use Child Tax Credit For Tax Savings Reviewed by Henda Yesti on July 05, 2018 Rating: 5

No comments:

Powered by Blogger.