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3rd Trimester
mejane123
member
Child Tax Credit I don't get it!!
mejane123
member
Can someone please possibly dumb down the Child Tax Credit for me? I've heard that its an automatic 1000 back in your tax return, in addition to what you'd normally get. But when I look online IRS.gov and others I can't find anything that really spells it out clearly. If anyone has dealt with this, can you please explain it to me? We're planning on using our tax return to help us out while I'm on maternity leave, but we'd kind of like to get an idea of how much we'll be getting. If we'll be getting some extra, that'd be nice. Thanks!!
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Re: Child Tax Credit I don't get it!!
Started Dating 03/04/2007 ~ Got Engaged 04/23/2010 ~ Said "I Do" 03/19/2011
Started TTC #1 11/2011 ~ BFP #1 03/28/2012-EDD 12/02/2012 ~
Greyson was Born by Unplanned C-Section on 11/20/2012 @ 8lbs 9oz 21 inhces
Started TTC #2 07/2013 ~ BFP #2 10/11/2013-EDD based on growth is June 26th
Liam born by Repeat C-Section on June 20, 2014 @ 8lbs 2oz 20.75 inches
A tax credit is something that comes off the total taxes you owe, so if you owe $5000, the credit deducts $1000 per child, so if you have 1 child you owe $4000. I'm not sure you still get the credit if it is more than what you owe.
This changes in 2013 and goes to $500 per child unless the current tax cuts are extended.
It also doesn't matter when your child is born as long as it is in the current tax year, you don't have to pro-rate the tax.
I know in our returns DH and I file seperatly. He claims DD because he makes more and we get the full thousand back, were as if I claim her with my lower income we only get part of it back. I am unable to claim my childcare. That is another thing that you can claim that gives you back a deduction.
So overall your income depends on how much of the credit you get. It was up to 1000. If you do not owe anything then you get it as a refund.
It's also limited if you make too much money though. If your joint income is greater than $110,000, it starts to go down from $1000.
This is true. My son was born Dec. 8 and we got the full $1000 tax credit when we did our taxes two months later.
I'm not a tax accountant, but I have been moonlighting as one in my FIL's business for several years. (Mostly just entering data which is checked by a real tax accountants later!) So definitely talk this over w/ your tax consultant before taking my word for it!
1.) Yes, the federal child tax credit is a $1000 per child tax credit. Meaning that once all your total tax bill (or refund) is calculated this comes right off the top. Making you a $1000 richer. As PP mentioned this goes down to $500 in 2013 if the current tax breaks don't get extended.
2.) It is not pro-rated. So it doesn't matter whether your child was born at 12:10 on January 1st or 11:59:59 on Dec. 31st, you get the full $1000 starting in the year your child was born.
3.) There is a maximum gross income amount where you're allowed to receive the full credit. So as PP mentioned, if you file jointly and your AGI is higher than $110,000 then you will get some pro-rated amount that is less than $1000. There are also maximums for filing separately, so make sure you choose wisely on who claims the child if you are filing separately.
4.) The child tax credit is not the only tax perk to having a kid. Your child care expenses are deductible, but only if you don't use a flexible spending account (FSA) through your employer to pay for or get reimbursed for these expenses. The details are a little foggy on this one (I blame pregnancy brain), but as I recall some employers offer FSAs where you choose at the beginning of the year how much pre-tax money to put into the account and you use that money during the year to pay for childcare. An FSA is usally a better deal for most parents than the tax deduction (to AGI), so if your employer offers one USE IT! If you do take the tax deduction, you need documentation from your child care provider of how much you paid. You cannot deduct things like the cost of food/diapers/field trips/etc., only childcare itself.
5.) Many people forget about this one, but it can be huge. You can deduct your medical expenses if they are 10% or more of your AGI. Many people hit the 10% threshold in the year they give birth because of hospital bills, well-baby checks, OB-GYN bills, etc. I believe you can also count health insurance premiums you pay, deductibles, co-pays, even some non-prescription healthcare items like tylenol or guaze can be deducted. So keep all your reciepts and bring them with a big smile to your tax preparer!!
I wish that was a problem for us!!
DS was born on Dec 31 at 719pm....we got our full tax credit.
You can always sign up at hrblock.com for an account and mess around with the file your taxes feature. (Obviously, don't file anything) to see where it would have put you this prior tax year. That's what I did. I'm an accountant, but I wanted to make sure I was correct so I double checked myself.
But I think everyone else explained it out right. $1000 CREDIT - towards the taxes you owe, which can give you $1000 back if you don't owe taxes.
Good news and bad news.
Good news, your medical expenses only have to exceed 7.5%, not 10%.
Bad news, unless your insurancepremiums are paid with after tax dollars, they don't count as a medical expense. Almost always, if your insurance premiums are paid through your employer through payroll deductions, it is with pre tax dollars, therefore, they can not count towards the 7.5%. Also, I don't beleive OTC medications can be counted in this 7.5% unless you have a note from your doctor. They could a few years ago, but it changed with the Obama administration.
I prayed for this child, and the LORD has granted me what I asked of Him. ~ 1 Samuel 1:27 NIV
Ditto this!
Also, keep in mind that it's almost always better to have your daycare expenses taken out through your employer pre-tax, than deducting from your taxes. I know for us, if we do it on our taxes we are limited to only being able to deduct $600 in expenses. Through our employer I think we can have 5K taken our pretax, which lowers our taxable income.
Maybe you can answer this for me. I plan to use the $5000 dependent care FSA. Say my actual cost for daycare is $15000. Can I claim the remaining $10K or is that null and void because I used the FSA?
2013 Books Read 11/52
my read shelf:
It is going back down to $500. Yes, if your baby is born in December, you still get the full amount.
I work with federal taxes for a living. Here's the credit as I understand it, but I am by no means an expert:
The CTC will reduce the tax you owe, but IS NOT a refundable credit, so it doesn't mean you'd get an additional refund. It can only reduce your tax requirement to 0. The Additional Child Tax Credit is separate and refundable, and if eligible, may result in a higher tax refund. So, let's say that your tax is 2000 for the year, and you had withholding from your job of 1500. The CTC would be 500, bringing your tax owed to 0. At that point, it would be possible to get the additional child tax credit, which is refundable.
I would suggest, as a safety precaution, call the IRS tax law line at 1-800-829-1040 and ask to speak to a tax law representative regarding the credit. They ask you a short list of questions for eligibility and advise you on which forms to file. They can also assist in whether it is better for you to file a married filing joint tax return. I think it is always a good idea to read the child tax credit information in Publication 17 published in the year you'll be asking the question in order to make sure you understand it.
Good luck with your taxes!!