2013 Child Tax Credit of $1,000 Extended
The Child Tax Credit Extended into 2013 & Beyond
The full $1,000 Child Tax Credit has now been extended through 2013 and beyond due to the fiscal cliff deal. signed in to law on Jan 3, 2013.
Here’s a bit of history on why this is happening.
The Child Tax Credit was Scheduled to Drop in 2013
As part of the Obama tax cut deal reached with Republicans, the previous Bush tax cuts that raised the Child Tax Credit to $1,000 from $500 were extended through 2011 and 2012.
Without further extension, the child tax credit was set to drop back down to $500 in 2013.
However, with the fiscal cliff deal, the $1,000 tax credit was extended for at least the next 5 years.
What is the Child Tax Credit?
For those looking for a little more background, the Child Tax Credit allows you to claim a maximum $1,000 per qualified child.
This is a non-refundable income tax credit, meaning that if your credit exceeds your income tax liability, then you won’t get a check for the difference.
Still, non-refundable credits are great, because they represent a subtraction from your actual tax liability. which is much more valuable than a deduction (which is only a subtraction from your taxable income ).
However, if your income is below a certain threshold, you can also claim the ‘Additional Child Tax Credit ‘, which allows you to get a refund for the difference if your credit exceeds your tax liability.
Can you Claim the Child Tax Credit in the Year the Child was Born?
What if the child was born in the second half of the year, or even the last day? Can you still claim the child tax credit for that year?
In short, yes. Publication 972 lists this
as one of the exceptions in which you can claim the credit.
Child Tax Credit Income Levels & Qualifying Criteria
The Child Tax Credit is limited if your MAGI is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the credit phase-out begins at $110,000. For married taxpayers filing a separate return, it’s at $55,000. For all other taxpayers, the phase-out begins at $75,000.
According to the IRS Child Tax Credit FAQ, a qualifying child for this credit is someone who must also meet the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence. So you’ll want to double-check that your child qualifies before filing for the credit.
There are also tax credits for child care you may want to look in to.
Deep Thoughts by G.E. Handy
So, let me first state that I would not recommend anybody schedule a December inducement or c-section for a January estimated due date just to be able to shave off $1,000 in tax liability. But for those due in mid or late December, holding off until January could cost you $1,000!
And to that point, it got me thinking some crazy thoughts…
You would have to assume those that are aware of this special tax scenario are on top of their finances. And they are probably fairly intelligent, or well educated on top of that. Which makes me wonder:
- Do babies born in the last week of December have a higher average IQ than those born in other weeks of the year?
- What is the average income of the households they are born into vs. other weeks of the year?
Ponder those deep thoughts for a moment…
Related Posts:Source: 20somethingfinance.com