The additional child tax credit has expanded the income limits

By: Robert A. Johnson

In the last few years, there have been many families with children who received some important tax relief because of an increase of the Child Tax Credit. This is really a Reduction in the taxes that you pay and not simply a Deduction from your taxable income. For the 2007 tax return, the minimum earned income amount that is used to figure the additional child tax credit has been raised to $11,750.

Child Tax Credit

The Working Families Tax Relief Act was passed by Congress in 2004. It kept the Child Tax Credit at $1,000 for each qualifying child through the year 2010. You must stay within the income thresholds of your filing status. You must use Tax Form 8812, the Additional Child Tax Credit, in order to figure out your additional credit.

Claiming the Child Tax Credit

In order to claim this credit, you must use the 1040 or 1040A tax forms ONLY. This credit is limited if your MAGI is above a specific amount. The amount will vary depending upon your filing status.

• Married filing separately - $55,000

• Married filing jointly - $110,000

• All others - $75,000

Additionally, the Child Tax Credit is usually limited by the amount of income tax that you owe as well as owing any alternative minimum tax.

If the amount on your 2007 tax form for your Child Tax Credit is more that the specified amount of income tax that you owe, you may be eligible to claim some if not all of the difference as an “Additional” Child Tax Credit. This may give you a refund even if you don’t owe any tax. On your 2007 tax form, the total amount of both the Child Tax Credit as well as any Additional Child Tax Credit is not able to exceed the maximum of $1,000 for each child that qualifies.

Claiming the additional child tax credit

In order to claim this credit, follow the steps below:

1. Make sure that you have figured the amount of your child tax credit, if any.

2. If the answer was “Yes” on lines 4 or 5 on the Child Tax Credit Worksheet in Form 1040, 1040A or 1040NR instructions use form 8812 to see if you qualify for the additional child tax credit.

3. If you have put an additional child tax credit on line 13 of Tax form 8812, then carry that figure to Form 1040 – line 68; 1040A – line 41; or Form 1040NR – line 62.

Don’t overlook the adoption credit in the 2007 tax return

By: Robert A. Johnson

Adoption is near and dear to my heart, as I was an adopted infant. I have researched adopting hard to place kids, and was happy to find that with some of the struggles that are unique to adopted families, the expense of bringing that dream home is offset with a tax credit. While the cost of raising a child cannot be calculated to make it financially profitable, having a tax adoption credit available makes adoption much more achievable for many families that long for a child. If you have started the adoption process, you know the costs associated can be overwhelming.

The tax laws for adoption credit are fairly generous. Any direct expenses, such as travel, attorney, court and other legal costs, are deductible. The adopting parent (s) can claim an adoption credit of up to $11,650 for 2008 for each eligible child. In order to qualify for this, you must have paid for adoption expenses out of your own pocket, any you must have adopted an eligible child. This means any child 17 or younger, or any US citizen or resident alien who is physically or mentally unable to care for themselves.

For adopting parents who adopt a special needs child, the full amount of the adoption credit can be claimed, regardless to what year the adoption became final. For children who are US citizens, you may take the adoption credit in the year after your expenses were paid (if the adoption was not final), or the same year if it was finalized. For foreign adoptions, the tax credit is only available the year the adoption was finalized. You must get an Adoption Taxpayer ID number if no Social Security number is issued.

The max dollars you claim for this credit is limited by your actual expenses as well as the phase out range for income. If you had one failed adoption attempt, you can write off your expenses for both processes once you have a finalized adoption. If you are filing a prior tax return, or any 2007 tax form, it would be best to hire an accountant with expertise in this tax credit area to make sure you get your full tax credit if you have adoption expenses. There are some expenses you can’t claim with this credit, such as surrogate mother expenses, so make sure you are doing things right.

This is encouraging for families who want to find a way to make a difference in the lives of a child, or to add to their family. Adoption is a beautiful gift, and now you can find a way to afford it. Don’t limit yourself to where you find that perfect addition. The different states often have children available that need a family, and it is much less expensive than overseas adoption. If you want to go overseas, though, the incentives on your taxes take the sting out of the money it costs. There is no way to put a price on your child, so go change a child’s world, and the 2007 tax adoption credit will help you do it.