Don't get confused: The child tax credit is in addition to the child care credit and in addition to the tax savings delivered when you claim an exemption for a dependent child. The credit is worth $1,000 for each child you claim as a dependent who is under age 17 at the end of the year. If you have four children, the credit can cut your tax bill by up to $4,000. Remember, a credit offsets your tax bill dollar for dollar.
The amount of the child credit is phased out at higher income levels. The phase-out begins when adjusted gross income (AGI) passes $110,000 on a joint return, $55,000 if you're married filing separately, and $75,000 for all other filing statuses. For every $1,000 (or fraction of $1,000) your AGI exceeds the trigger point, you lose $50 of credit. Say, for example, that you file a joint return and your AGI is $115,000. The $5,000 over the threshold would reduce your credit by $250. If you have just one dependent child in 2003, your credit would be just $750. If you have three children who qualify, though, your credits would be worth $2,750 ($3,000 less $250).
If your child tax credit is more than your tax, your may get a refund of some of your credit. The refundable part of the credit is called the additional child tax credit. You may be eligible for the additional child tax credit if:
- Your taxable earned income is more than $10,750 (for 2004), or
- You have three or more eligible children and the Social Security and Medicare tax you paid is more than your income tax.
Return to Dependents & Family
