If you have children, you know what a blessing they can be - especially during tax time. If you have dependent children, you may be able to claim a federal income tax child credit that is set at $1,000 per qualifying child in 2003 and 2004. Thanks to legislation enacted in 2003, taxpayers who claimed a $600 per child tax credit on their 2002 returns should have received a $400 per child advance of the increased $1,000 per child credit tax law amount during the summer of 2003.

Answers to Your Child Tax Credit Questions

Do you have child tax credit questions? We can help. For all child tax credits, a qualifying child must remain under age 17 through the end of the year and be either a U.S. citizen or resident alien. A qualifying child for the child credit tax law must also meet the dependency tests, and be your natural or adopted child, grandchild or great-grandchild, stepchild, or a foster child. According to the child care tax credit, “adopted child" includes a child placed with you for adoption even if the adoption has not been finalized. A foster child must have lived with you the entire year to qualify for child tax credits, unless the child was born or died during the year.

Child Care Tax Credit

Like most of the child tax credits and other breaks that have been enacted recently, there is an income limitation on the people who can claim this credit for the federal income tax child credit. The phaseout of the credit begins at modified adjusted gross income (AGI) of $110,000 for joint filers, $75,000 for singles and heads of household, and $55,000 for marrieds filing separately. You will lose $50 of your total child credit for each $1,000 (or fraction of $1,000) of your modified AGI that exceeds the applicable threshold. For this purpose, modified AGI includes the amount shown on Line 35 of Form 1040 or Line 22 of Form 1040A, plus any foreign earned income exclusion, foreign housing exclusion, and income from U.S. possessions, if any.

For more information, see our discussion of how to claim the credit.