The Earned Income Tax Credit - Essay Example

According to the Internal Revenue Service (2005), a qualifying child for the purpose of claiming EITC is a child who: is a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them ( for example, a grandchild, niece, or nephew); is under 19 years old at the end of the year for which the claimant is claiming for the EITC or under 24 years old at the end of the year for which the claimant is claiming for the EITC or any age and permanently and totally disabled, and lives with the claimant in the United States for more than half of the year for which the claimant is claiming for the EITC.

The Child Tax Credit is a nonrefundable credit and has a limit of $1,000 per qualifying child. The actual amount of the Child Tax Credit is determined based on the income. The amount of Child Tax Credit is smaller if the adjusted gross income is more than $110,000 and the filing status is married filing jointly, $75,000 and the filing status is single, head of household, or qualifying widow(er), or $55,000 and the filing status is married filing separately (Internal Revenue Service, 2004).

In addition, the Child Tax Credit is basically limited by the amount of the income tax the parent owes as well as any alternative minimum tax the parent owes (Internal Revenue Service, 2006). Parents who qualify for the Child Tax Credit may also qualify for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give the parent a refund even if the parent does not owe any tax. The credit is for certain parents who receive less than the full amount of the Child Tax Credit (Internal Revenue Service, 2004).

For 2005, the total amount of the Child Tax Credit and the Additional Child Tax Credit cannot be more than the maximum of $1,000 for each qualifying child (Internal Revenue Service, 2006). According to the Internal Revenue Service (2004), a qualifying child for the purpose of claiming the Child Tax Credit and the Additional Child Tax Credit is defined by the Internal Revenue Service as a child who: is a son, daughter, stepchild, adopted child, grandchild, or eligible foster child (who must be placed with the parent by authorized placement agency and the parent must have cared for the child as if the child was his/her own; is under 17 years old by December 31 of the year for which the parent is claiming the credit on the tax return; is a citizen or resident of the United States, and is claimed as the parent's dependent.

ReferencesInternal Revenue Service (2004). Child Tax Credit. Retrieved August 26, 2006, from http://www.irs.gov/pub/irs-pdf/p3965.pdfInternal Revenue Service (2005). Earned Income Credit: Qualifying Child Information. Retrieved August 26, 2006, from http://www.irs.gov/pub/irs-pdf/f1040sei.pdfInternal Revenue Service (2006). Claiming the Child Tax Credit. Retrieved August 26, 2006, from http://www.irs.gov/newsroom/article/0,,id=106182,00.htmlInternal Revenue Service (n.d.). It's Easier than Ever to Find Out if You Qualify for EITC.