Take Advantage of your Allowed Child Tax Credit
This article describes on how to take advantage of allowed child tax credit for tax payers in USA. In year 2010, child tax credit is set to $1000 per qualifying child under the age of 17. The amount mentioned in this article are applicable only to the filing status - Married Filing Jointly for the tax year 2010 and discusses the criteria of having one or two children maximum.
AGI (Adjusted Gross Income) can be up to $110,000 to take advantage of entire child tax credit. If you have one qualifying child, then you are eligible to get $1000. However this amount will reduce by $50 for every $1000 you make over $110,000.
If your AGI is $120,000 and you have one qualifying child, then you would receive $500 as child tax credit. If you have two qualifying children, then you are eligible to get $2000. If your AGI is $130,000, then you would receive $1000 as child tax credit.
If you and your spouse combined AGI is greater than $110,000, then here are a few things you can do to reduce your AGI and hence you can take advantage of your entire allowed child tax credit.
1.Estimate and Contribute FSA - Flexible Savings Account for Health Care. Be careful in selecting the amount, if you can not use it and then you have to forefit the unused amount.
2.Estimate and Contribute FSA - Flexible Savings Account for Dependent Care, if you spend money for day care expenses. Be careful in selecting the amount, if you can not use it and then you have to forefit the unused amount.
3.Use Commuter Card like Wage Works, if your employer is offering this plan.
4.Medical / Dental / Vision Insurance payments will reduce your AGI
5.Increase your contribution to 401K plan. The maximum is $16,500, if you are under age 49 or below, otherwise $22,000.
6.Contribute towards Traditional IRA, both you and your spouse is eligible to contribute up to 5,000
Note: These tips might help only
a. if your AGI falls in the range of $110,000 - $130,000 and you have at least one child.
b. If your AGI falls in the range of $110,000 - $150,000 and you have at least two children
c. You can do your own math, you have more than two children.
FYI - From next year - 2011, we may not get $1000 child tax credit per child due to the upcoming law changes. Refer to http://en.wikipedia.org/wiki/Child_tax_credit
for more details.
Sources: http://www.irs.gov http://en.wikipedia.org/wiki/Child_tax_credit