Do you have children? Did you know that you may be eligible to take advantage of certain tax credits just for having children? Tax credits reduce the amount of federal income tax a filer owed dollar for dollar. These savings offer much needed financial relief for individuals and families. But, before you can take advantage of these valuable savings, you must determine if you qualify. Qualifications for both the child tax credit and earned income credit are based upon the filer’s status and their earned income.
Child Tax Credit- How Much can you Claim?
Eligible families can deduct up to $1,000 per child under the age of 17. There are financial eligibility requirements that must be met in order to take advantage of this tax credit. Married filers filing jointly have an income phase out set at $110,000. Married filers filing separately have a phase out of $75,000. And, single filers have a phase out set at $75,000. Individuals or households reporting high incomes may not be eligible to take advantage of this child deduction.
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Earned Income Credit- Do You Qualify?
The earned income credit was developed to provide tax breaks to individuals and families who do not earn high incomes. Eligibility for the children’s tax credits are based upon the filer’s status as well as the total earned income reported. For 2011, the maximum credit available for three children is $5,750, the maximum amount for two children is $5,100 and the maximum amount for one child is $3,100. There is even a deduction available for filers without children, currently set at a maximum of $460.
The amount of the credit is reduced as the filer’s reported adjusted gross income increases. For tax years 2009 through 2013, the Earned Income Credit has been temporarily expanded to include working families with three or more dependents.
Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.