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Who Gets to Claim the Child Tax Credit?

The Child Tax Credit can slash up to $1,000 per child off the tax bill of the parent who can claim it. That's serious incentive for some parents to prove they're entitled to it.

However, before anyone starts thinking about what to do with this windfall, they should make sure it's really theirs to claim. A taxpayer cannot take the Child Tax Credit if someone else has the right to it.

How do we decide who takes the credit?
Generally, the person who qualifies to claim the child as a dependent on their tax return can claim the Child Tax Credit. You must pass all six of these tests to qualify:

  1. Age of child: Your qualifying child must be under the age of 17 at the end of the tax year. Most kids don't get any cheaper to raise on their 17th birthday, but them's the rules. On the bright side, you may soon qualify for education tax breaks when your child starts post-secondary classes.
  2. Relationship with child: Your son or daughter, of course, may qualify you for the credit. But if you take care of children other than your son or daughter, they may also treated as your children for this credit. This includes stepchildren, foster children, brothers, sisters, stepsiblings, or descendants of any of these people.
  3. Financial support: The child must not have provided more than half of his or her support. In addition, the child's parent or parents must have provided more than half of the child's support.
  4. Dependence: You must claim the child on your tax return.
  5. Citizenship: Your qualifying child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  6. Residence: The child must live with you or the child's other parent for more than half of the year. If the child is away from home temporarily -- for example, if he or she is at school, summer camp, a medical facility, or on vacation -- the child is still considered to be living with you or the other parent.

What if more than one person qualifies to take the credit?
If you and another person cared for the child the same number of days and contributed exactly the same amount of support, you both qualify. The tiebreaker in this case is each parent's adjusted gross income. The higher-income parent takes the credit. You cannot split the credit.

Unfortunately, if that parent's income puts them over the limits so that their credit is phased out or eliminated, the credit is lost. The Child Tax Credit begins to phase out when your adjusted gross income (before itemized deductions) reaches $75,000 for single filers, $55,000 for married taxpayers filing separately, or $110,000 for joint filers.

The credit may also be lost if the person who qualifies to take it does not owe a tax liability for the year. However, a taxpayer who doesn't owe tax may qualify for the Additional Child Tax Credit, which is refundable if he or she has more than $3,000 in earned income.

Next year, consider planning ahead. You may be able to arrange financial support and number of days caring for the child so that a parent who can benefit from the credit can take it.

What if my ex said I could take the credit?
A taxpayer cannot negotiate with a child's other parent over who takes the Child Tax Credit. You either qualify or you don't; it's not a bargaining chip between parents.

The Child Tax Credit is a fabulous benefit. If you have the right to take it, make sure you do.

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Sally Herigstad

Sally is a new Fool contributor for 2014, but a long-time personal finance writer, columnist, and certified public accountant. Sally wrote "Help! I Can't Pay My Bills" for St. Martin's Griffin.

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