For taxpayers with qualifying children, the Child Tax Credit is directly applied against taxes owed. While the credit is not refundable, like the Earned Income Credit, it does reduce the amount of tax owed by $1000 for each qualifying child, up to the amount of the tax. There are several criteria that must be met to claim this credit and the essential information is summarized below. For complete information relating to the Child Tax Credit, see the IRS Publication 972: Child Tax Credit.

Qualifications to Claim the Credit

Since this credit is taken against owed taxes, a taxpayer must earn income to qualify for it. For the 2009 tax year, the minimum earned income has been reduced to $3000 to allow more tax filers to claim the credit. This means that a taxpayer has to earn at least $3000 before they will qualify for the credit. For the purposes of figuring the credit, “earned income” includes taxable earned income and nontaxable combat pay.

Taxpayers who make over a certain amount, however, will not qualify to claim the credit. For the purposes of exclusion, the Modified Adjusted Gross Income (MAGI) is used. This is the amount of Adjusted Gross Income plus any Foreign Income Exclusions. For taxpayers who are using the Married Filing Joint status, the income limit is $110,000. For Single, Head of Household, and Qualifying Widow(er) filers, the limit is $75,000. Married Filing Separately taxpayers will be limited to $55,000, or one-half the Married Filing Joint limit.