How Do You Calculate the Child Tax Credit?

To calculate the child tax credit, you can use the online child and dependent tax credit calculator, or you can look at the IRS guidelines for filling in Form 1040. This is available through the IRS website.

Each qualifying child is worth $2,000. For two or more children, the child tax credit is worth $2,000. Sometimes, you may be able to claim the additional child tax credit, which could provide you with a tax refund from the IRS.

For qualifying children, the IRS allows you to claim a tax credit. The value of the child tax credit is currently $2,000 per qualifying child. While non-refundable, the child tax credit reduces your tax bill dollar-for-dollar, which makes it highly valuable for all families.

How Does a Child Qualify?

To qualify for the child tax credit, your child must be claimed via Form 1040. The child must be under the age of 17 by the end of the tax year.

The child can be anyone from a blood relation to a stepchild or adopted child. Direct descendants always qualify.

Your qualifying child can only be claimed on a single tax return and can’t have provided more than 50% of their total financial support. They must have lived with you for at least six months of the year and must be a US citizen/national/resident alien.

For children born during the tax year, the child must have lived with you for at least half of the remaining tax year.

When Does the Child Tax Credit Phase Out?

If you have a high adjusted gross income, there are some complex calculations to consider. If married filing jointly, the child tax credit begins to phase out at $111,000. If married filing separately, it phases out at $55,000. Single filers will see the credit phase out at $75,000.

For every $1,000 above these thresholds, the child tax credit is reduced by $50.

For example, if you earn $20,000 more than your phaseout limit and have one qualifying child, you won’t be able to claim the credit.

How the Child Tax Credit Works

The main change brought by the Tax Cuts and Jobs Act (TCJA) was the doubling of the standard deduction and the elimination of personal exemptions.

The standard deduction stands at $12,200 per person for the 2019 tax year. For married couples filing jointly, this gives them a standard deduction valued at $24,400.

The TCJA increased the child tax credit to $2,000 per qualifying child. It can only be claimed if the child has a Social Security Number (SSN).

Since personal exemptions have been eliminated, this tax credit has become highly desired. Plus, the accessibility of the credit has been increased. It now only begins to phase out at $200,000 for single filers and $400,000 for married couples filing jointly.

Why Choose Married Filing Separately?

If you’re a taxpayer who stands to gain more when married and filing separately, there are rules to follow. For example, maybe you’ve chosen this filing status because you’re paying back taxes, child support, or other loans.

Another reason why you may decide to file separately is that both you and your spouse have a high income, so by filing separately, you can reduce the tax burden.

Remember that both you and your spouse must choose to use the standard deduction or itemization. The IRS doesn’t allow married couples to choose differently.

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