Tuesday, December 22, 2009

More Eligible for Child Tax Credit

You can claim up to $1,000 for each of your qualifying children. Child Tax Credit is reported on line 51 of Form 1040 but you can only use the amount of the credit that reduces your income tax to zero.

Then, you can claim the unused portion as an additional child tax credit on line 65 which is treated like a tax payment and added to your federal income tax withheld. In order to be eligible for the 2008 tax year, you need taxable earned income in excess of $8,500 and then 15% of that excess can be an additional child tax credit as long as it does not exceed the unused amount of the Child Tax Credit from line 51.

The American Recovery and Reinvestment Act of 2009 (ARRA) reduces the earned income threshold to $3,000 for 2009 and 2010 only. This will increase the eligibility by including more low income taxpayers.

To take advantage of the Additional Child Tax Credit, complete Form 8812 and report the total on Form 1040, line 65.

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