Working families know how expensive it can be to raise children. At tax time, the government offers some help for these families through the Child Tax Credit, which was enacted in 1997. This credit allows eligible families to receive up to $1,000 per child under the age of 17.
Both Democrats and Republicans have shown continued support for the tax credit, leading to an expansion in 2001. Now, qualifying families are eligible to subtract the credit right form the amount of taxes they owed for the year. For example, a couple with 3 children are able to deduct $3,000 ($1,000 per child) from the taxes they owe for the year.
Refundable
The Child Tax Credit is refundable if the credit amount that a family is eligible for exceeds the amount of taxes that a family knows. Known as the Additional Child Tax Credit, this encourages families to work even if they receive a low income, as they can claim the tax credit even if they don’t owe any taxes.
For 2014, working families are able to receive a refund on 15% of their income above $3,000, with $1,000 per child maximum. Because of this, low income families have the opportunity to claim benefits that are traditionally reserved for higher income taxpayers.
Income Requirements
The Child Tax Credit is based on income, and the more a family makes, the more the credit is worth, up to the $1,000 limit per child. Parents have to earn more than $3,000 to receive the credit, though partial credit can be given. A family with two children and an income between $3,000 and $16,333 may be eligible to receive a portion of the credit.
Important Poverty Reduction
The Child Tax Credit has shown to have significant effects on the reduction of poverty throughout the United States. The credit saved 3 million people from poverty last year, alone, which includes 1.6 million children. The credit can be combined with the Earned Income Tax Credit, to help increase the amount of money a family receives, helping them to rise above the poverty line. Typically, tax assistance relating to children aren’t available for many low income families, and some, like the Child and Dependent Care Tax Credit aren’t refundable.
The more income a family has, the less assistance they require financially. A family with two children and an income of $110,000 a year will receive less than the standard Child Tax Credit. Families with incomes greater than $150,000 recieve no credit at all. If you file using the single or head of household status, your income threshold is $75,000 in order to receive the full credit. Single filers with income greater than $115,000 a year aren’t eligible for the credit.
