The Child Tax Credit and the Child and Dependent Care Tax Credit are two credits available to individuals with children and/or other dependents. The credits were put in place to help families who qualify, ultimately reduce their tax burden.
Who is eligible for the Child Tax Credit?
Taxpayers with qualifying children under the age of 17 may qualify for the Child Tax Credit of up to $2,000 per child. With changes to the 2017 tax code overhaul, the credit is now refundable up to $1,400. That means if you, as a taxpayer, don’t owe any tax before claiming the credit, you may receive up to $1,400 as part of your refund. To claim the credit, families have to meet a $25,000 minimum income threshold. There is also an additional $500 non-refundable credit for other qualifying dependents, including children age 17 or older.
To take full advantage of the Child Tax Credit, your modified adjusted gross income must be less than $400,000 if married filing jointly or $200,000 for any other filing status. You must have provided at least half of the child’s support during the previous tax year and the child must have lived with you for at least half of the year. There are some additional qualifications and exceptions to the statements listed. The IRS’ Interactive Tax Assistant can help you determine if you qualify.
Who qualifies for the Child and Dependent Care Tax Credit?
Similar to the Child Tax Credit, the Child and Dependent Care Tax Credit is also intended to help families with children. The credit is between 20% and 35% of child care expenses, depending on your adjusted gross income. The credit is equal to the amount paid to the provider up to the max of $3,000 worth of child care and similar costs for a child under age 13, an incapacitated spouse or parent, or another dependent. The dollar amount is doubled to $6,000 for two or more dependents.
To qualify for the credit, you must be able to provide the care provider’s name, address and Taxpayer Identification Number — either a Social Security number or Employer Identification Number. The provider cannot be your spouse, a parent of the dependent child, a dependent listed on your tax return, or your child who is age 18 or younger even if the child is not listed as a dependent on your return.
If you’re married, you must file as married filing jointly in order to take this credit. Also, you must have earned income. The higher your income, the less your credit percentage will be. However, you won’t completely phase out of the credit because of income limits.
Get help with filing your taxes
For help with your tax preparation, turn to your Credit Union. LGFCU offers low-cost tax help to members. Or, as a member, you can take advantage of the TurboTax discount, if you prepare your own taxes online. You may also want to check on whether your family qualifies for no-cost tax preparation services in your community
The advice provided is for informational purposes only. Consult your tax advisor for additional guidance.