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Tax credits: Child tax and additional child tax credits

Tax BasicsWhile children are a bundle of joy, they also cost a bundle of money. But Uncle Sam offers a way your youngsters can save you tax cash: child tax credits.

The child tax credit and its companion additional child tax credit can cut your tax bill by several hundred dollars for each young dependent you claim. For the child tax credit, there are no records to keep or extra forms to file to get this savings. If you claim tax relief for more than one child, then you do have to fill out Form 8812.

And for both credits, there are certain tests to meet and worksheets to complete before the Internal Revenue Service will let you take the credit.

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New law, better breaks
Tax law changes in the last few years have made the child tax credit even more appealing. The legislation increases the amount of the credit gradually over 10 years, with a bigger bump up in 2003 and 2004. The chart below shows how much a parent can claim in tax credit cash for each dependent child.

Tax Year
Maximum Credit
Per Child
2001 and 2002
2003 and 2004
2005 through 2008

Tax law changes also make this credit partially refundable for lower-income filers with just one or two children, meaning a portion of it can be claimed even if they owe no taxes.

Credit limits
Just how much of a child tax credit you'll get is limited, however, depending on your tax-filing status and the amount of money you earn.

The credit begins phasing out if you make $110,000 and married, filing jointly; earn $75,000 and file as head of household, single or qualifying widow or widower; or make $55,000 and are a married-filing-separately taxpayer.

Claiming lots of kids
Taxpayers with larger families will want to claim the additional child tax credit. This is separate from the child credit, primarily because it can be taken even if you owe no taxes. That means your kids could help you get a refund check from Uncle Sam.

In addition to having its own line on your individual tax return, the additional child tax credit requires a bit more paperwork. Form 8812 must be filled out and filed with your return.

File the right return
Form 1040EZ filers cannot claim the child or additional child tax credits. You must file Form 1040 or Form 1040A to get these breaks. Fill out the child tax credit worksheet included in both forms' instructions (and Form 8812 if applicable) and transfer the information to the appropriate lines on your tax return.

And don't forget to provide the name and identification number (usually a Social Security number) for each qualifying child on your tax return.


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Tax Basics
Click on the links below to view the seven-part series of Tax Basics
Part One
Part Two
Part Three
Part Four: Tax credits
Part Five
Part Six
Part Seven


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