Child tax credit
Encyclopedia
A child tax credit is the name for tax credit
s issued in some countries that depends on the number of dependent children in a family. The credit may depend on other factors as well: typically it depends on income level. For example, in the United States, only families making less than $110K per year may claim the full credit. In many US counties the median family income is more than $110K per year, so the income level of the family is a larger consideration than the number of children. For example, in 2009, the majority of families in Loudoun County made $110,600 or more and would therefore not receive the full credit. Similarly, in the United Kingdom the tax credit is only available for families making less than £42,000 per year.
, a family with children and an income below about £42,000 can claim child tax credit on top of child benefit
. The tax credit is "non-wastable" - i.e. it is paid whether or not the family has a net tax liability - and is paid in or out of work. Higher rates are paid for disabled children. It is integrated with the working tax credit
, which also provides support for childcare
costs.
In the tax year 2009/10, for those with a household income below £58,000 this is worth £545 a year as a family element (£1,090 if they have a baby under 1 year old, as you get an extra £545). For those with low incomes, there is an additional £2,235 per child per year, and this is tapered away at a rate of 39% as earnings increase above £16,040 per year.
In April 2011, the household income amount will go down to £41,000 to qualify for Child Tax Credits. You will also no longer get the bonus £545 for a baby under 1 year old.
All income is tested for the Credit, so a couple who both work and have children, will have both salaries taken into account.
. One of the most common is the Child Tax Credit, provided by 26 U.S.C. Sec. 24. The Child Tax Credit reduces tax liability for families making less than $130,000. After $110,000 it phases out at the rate of 5 cents for each additional dollar earned above $110,000.
For a relatively small number of families, the child tax credit will exceed their tax liability. In many such cases, the unused portion of the child tax credit is refundable as the "additional child tax credit." The amount that is available as a refund depends on the amount of earned income, and in certain circumstances the amount of social security and medicare taxes paid. Refer to IRS form 8812 and instructions.
The child tax credit is available to taxpayers who have a “qualifying child” within a family making less than $130K per year. The full credit is only available if the family makes less than $110K per year. A person is a “qualifying child” if he or she has not attained the age of 17 by the end of the taxable year and meets the requirements of 26 U.S.C. Sec. 152(c). In general, a qualifying child is any individual for whom the taxpayer can claim a dependency exemption and who is the taxpayer’s son or daughter (or descendent of either), stepson or stepdaughter (or descendent of either), or eligible foster child.
The per-child amount was originally set at $400 in 1998, and has since increased to $1,000. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
extended this $1,000 cap through the end of 2012. If the law is not changed, the maximum amount will return to $500 per-child in 2013. However, this credit is phased-out for taxpayers above certain thresholds defined in 26 U.S.C. Sec. 24(b)(2). If the taxpayer’s taxable income is over the threshold, the total credit decreases by $50 for each $1,000 (or part thereof) over the threshold.
A taxpayer’s total tax credit is refundable to the extent of the greater of 15% of the taxpayer’s earned income over $3,000 (new for 2009) (an amount adjusted for inflation IAW 26 U.S.C. Sec. 24(d)(3)) or, as long as the taxpayer has three or more qualifying children, the excess of social security taxes paid over earned income credit, all subject to the income threshold. Unless a married couple files jointly, a qualifying child will be treated as such for the purpose of the Child Tax Credit for the taxpayer who is the child’s parent, or if not a parent, the taxpayer with the highest adjusted gross income for the taxable year in accordance with 26 U.S.C. Sec. 152(c)(4)(A). If more than one parent claims the child and do not file a joint return, the child will be treated as a qualifying child of the parent with whom the child resided for the longest period during the taxable year, and if the child resided with each parent equally, with the parent who has the highest adjusted gross income in accordance with 26 U.S.C. Sec. 152(c)(4)(B).
Tax credit
A tax credit is a sum deducted from the total amount a taxpayer owes to the state. A tax credit may be granted for various types of taxes, such as an income tax, property tax, or VAT. It may be granted in recognition of taxes already paid, as a subsidy, or to encourage investment or other behaviors...
s issued in some countries that depends on the number of dependent children in a family. The credit may depend on other factors as well: typically it depends on income level. For example, in the United States, only families making less than $110K per year may claim the full credit. In many US counties the median family income is more than $110K per year, so the income level of the family is a larger consideration than the number of children. For example, in 2009, the majority of families in Loudoun County made $110,600 or more and would therefore not receive the full credit. Similarly, in the United Kingdom the tax credit is only available for families making less than £42,000 per year.
Germany
Germany has a programme called the "Kinderfreibetrag" which functions as a tax credit.United Kingdom
In the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, a family with children and an income below about £42,000 can claim child tax credit on top of child benefit
Child benefit
Child benefit is a social security payment disbursed to the parents or guardians of children. Child benefit is means-tested in some countries.-Australia:...
. The tax credit is "non-wastable" - i.e. it is paid whether or not the family has a net tax liability - and is paid in or out of work. Higher rates are paid for disabled children. It is integrated with the working tax credit
Working tax credit
The Working Tax Credit is a state benefit in the United Kingdom made to people who work on a low income. It is a part of the current system of refundable tax credits introduced in April 2003 and is a means-tested social security benefit...
, which also provides support for childcare
Childcare
Child care means caring for and supervising child/children usually from 0–13 years of age. In the United States child care is increasingly referred to as early childhood education due to the understanding of the impact of early experiences of the developing child...
costs.
In the tax year 2009/10, for those with a household income below £58,000 this is worth £545 a year as a family element (£1,090 if they have a baby under 1 year old, as you get an extra £545). For those with low incomes, there is an additional £2,235 per child per year, and this is tapered away at a rate of 39% as earnings increase above £16,040 per year.
In April 2011, the household income amount will go down to £41,000 to qualify for Child Tax Credits. You will also no longer get the bonus £545 for a baby under 1 year old.
All income is tested for the Credit, so a couple who both work and have children, will have both salaries taken into account.
United States
There are several different credits that a taxpayer can claim in the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. One of the most common is the Child Tax Credit, provided by 26 U.S.C. Sec. 24. The Child Tax Credit reduces tax liability for families making less than $130,000. After $110,000 it phases out at the rate of 5 cents for each additional dollar earned above $110,000.
For a relatively small number of families, the child tax credit will exceed their tax liability. In many such cases, the unused portion of the child tax credit is refundable as the "additional child tax credit." The amount that is available as a refund depends on the amount of earned income, and in certain circumstances the amount of social security and medicare taxes paid. Refer to IRS form 8812 and instructions.
The child tax credit is available to taxpayers who have a “qualifying child” within a family making less than $130K per year. The full credit is only available if the family makes less than $110K per year. A person is a “qualifying child” if he or she has not attained the age of 17 by the end of the taxable year and meets the requirements of 26 U.S.C. Sec. 152(c). In general, a qualifying child is any individual for whom the taxpayer can claim a dependency exemption and who is the taxpayer’s son or daughter (or descendent of either), stepson or stepdaughter (or descendent of either), or eligible foster child.
The per-child amount was originally set at $400 in 1998, and has since increased to $1,000. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 , was passed by the United States Congress on December 16, 2010 and signed into law by President Barack Obama on December 17, 2010....
extended this $1,000 cap through the end of 2012. If the law is not changed, the maximum amount will return to $500 per-child in 2013. However, this credit is phased-out for taxpayers above certain thresholds defined in 26 U.S.C. Sec. 24(b)(2). If the taxpayer’s taxable income is over the threshold, the total credit decreases by $50 for each $1,000 (or part thereof) over the threshold.
A taxpayer’s total tax credit is refundable to the extent of the greater of 15% of the taxpayer’s earned income over $3,000 (new for 2009) (an amount adjusted for inflation IAW 26 U.S.C. Sec. 24(d)(3)) or, as long as the taxpayer has three or more qualifying children, the excess of social security taxes paid over earned income credit, all subject to the income threshold. Unless a married couple files jointly, a qualifying child will be treated as such for the purpose of the Child Tax Credit for the taxpayer who is the child’s parent, or if not a parent, the taxpayer with the highest adjusted gross income for the taxable year in accordance with 26 U.S.C. Sec. 152(c)(4)(A). If more than one parent claims the child and do not file a joint return, the child will be treated as a qualifying child of the parent with whom the child resided for the longest period during the taxable year, and if the child resided with each parent equally, with the parent who has the highest adjusted gross income in accordance with 26 U.S.C. Sec. 152(c)(4)(B).