Other than the deductions you can claim on your tax return, there are tax credits that are way more valuable. While the deductions can only reduce your taxable income, the tax credits actually cut down your total tax bill. Meaning when you claim a tax credit, you pay less tax.
For this reason, claiming tax credits on your tax return is very important. One of the most popular and available tax credit is the child tax credit, shortly known as the CTC. Generally, taxpayers with children under the age of 17 can claim this credit. But as with any other credit or deduction, there are a few requirements that both the child and you must meet in order to claim the child tax credit.
CTC Requirements and Phase-Out Threshold
Other than the age, there are a few qualifications that the child must meet. These requirements are also known as tests. There are a total of seven “tests” that the child must meet in order for you to claim the child tax credit. Read the following list to see whether you qualify for the CTC or not.
Dependent Test: You must claim the child dependent on your tax return.
Age Test: The child must be under the age of 17 by the end of the tax year.
Residency Test: The child must be living with you for more than half of the tax year.
Support Test: To claim CTC, the child must not provide more than half of the financial support he or she needs.
Nationality Test: The child must be a U.S. citizen, national, or resident alien.
Relationship Test: The child must be directly related to you. He or she can be your son, daughter, brother, sister, stepbrother, stepsister, cousin, etc. or descendants of those such as your nephew, niece, or grandchildren.
These are the most basics of the child tax credit requirements. As for the phase-out in 2021, the child tax credit phases-out starting at $200,000 AGI for single filers and $400,000 for joint filers. The child tax credit completely disappears if the taxable income is above $220,000 for single and $440,000 for joint filers.
Child Tax Credit Amount
The Tax Cuts and Jobs Act of 2017 increased both the threshold and the value of the child tax credit. Including 2021, from 2018 to 2015, the CTC amount is set to be $2,000. Not only limited to this but $1,400 of it is refundable. So it can add up to your tax refund even if your tax bill is zero.
To learn more about tax refunds and ways to maximize it, visit our taxes page.