Child Tax Credit

It doesn't matter if you are a Democrat or Republican or if you even follow politics at all. If you could use some extra money this summer, President Bush's new tax plan will likely make you smile. Come July, many families will receive $400 for each child they claimed on their 2002 returns as an advance payment of their 2003 Child Tax Credit.

This is a result of the recently passed Jobs and Growth Tax Relief Reconciliation Act of 2003, which has raised the Child Tax Credit to a maximum of $1,000 per child from the previous $600 per child.

According to the IRS, 'to qualify, a child must be under age 17, be a citizen or resident of the United States, be claimed as the taxpayer’s dependent, and be the taxpayer’s (a) child, stepchild, adopted child, or grandchild; (b) sibling, stepsibling, or a descendant of any of them, whom the taxpayer cared for as his or her own child, or (c) eligible foster child.'

Beginning July 25, the IRS will begin sending notices and then the checks to eligible families. This process is automatic and there is no need to call or file any additional papers with the IRS.

When should you get your money?

It depends on the last two digits of your social security number, with those ending in 00-33 -- mailed July 25, 34-66 -- mailed August 1,and 67-99 -- mailed August 8.

The IRS also provides examples of taxpayers who qualify, including:

• Mr. and Mrs. Brown have two children, ages 8 and 10; their 2002 AGI (Adjusted Gross Income) was $50,000 and they claimed a Child Tax Credit of $1,200. The Browns will receive an advance payment of $800.
• Mr. and Mrs. Green have two children, ages 11 and13; their 2002 AGI was $125,500 and they claimed a Child Tax Credit of $400 because of the phaseout provision. The Greens will receive an advance payment of $800.
• Ms. Gray has one child, age 7; her 2002 earned income was $16,560; she claimed a Child Tax Credit of $368 and an Additional Child Tax Credit of $232.  Ms. Gray will receive an advance payment of $389.
• Mr. and Mrs. White have three children, ages 12, 14 and 16 in 2002; their 2002 AGI was $65,000 and they claimed a Child Tax Credit of $1,800. The Whites will receive an advance payment of $800, based on their two younger children, since their oldest child turns 17 in 2003.

As you can see, not all taxpayers qualify. If you child was born in 2003 or before 1987, you are not eligible. You may also not be eligible if you have a modified adjusted gross income above $110,000 (if married filing jointly), $55,000 (if married filing separately), or $75,000 (for all others).

Even above these limits, you still might qualify for some money if you are not too high above the limits. The IRS states that for every $1,000 your earn above these thresholds, the total credit amount is reduced by $50. So whether or not you would still get money depends on how far over you were and what your total tax credit was, which depends on how many children you have.

For example, for Mr. and Mrs. Green mentioned above, their tax credit is $2000 now ($1000 for each child, including the $600 from last year and the new $400 credit). They are over the limit by $15,500, so that would decrease their tax credit by $800 (16 x $50). They now have a $1200 credit ($2000 - $800) and they already received $400, so they will now get an additional $800.

In general, you AGI has to be about $20,000 over the above limits per child to not qualify for any money.

Parents who make under a certain AGI, mostly minimum wage earners who make under $26,000 and don't pay much or any income tax, may not get the full tax credit or any money at all. There is, however, an Additional Child Tax Credit, for individuals who get less than the full amount of the Child Tax Credit because their tax is too low.