The child tax credit is available to certain taxpayers that have one or more qualifying children age 16 or younger at the end of the tax year.
The child cannot provide more than 50 percent of his own support; must be your child, stepchild, qualifying foster child, sibling, half-sibling, step-sibling or the descendant of any one of these; must be claimed as your dependent on your federal tax return; must be a U.S. citizen, a U.S. national or resident alien; and must have lived with you for more than half of the tax year. If the child you wish to claim does not meet all these criteria, she is an unqualified dependent and you cannot claim the credit.
Earned Income Credit
The earned income credit was designed to assist families with low incomes by allowing a refundable tax credit even if the taxpayers have no tax liability. Abuse of this tax credit by unscrupulous tax preparers has led the Department of Justice to file numerous lawsuits against preparers who claim unqualified or false dependents on their clients’ tax returns. A qualifying child for the earned income credit must be your child, stepchild, qualifying foster child, sibling, half-sibling, step-sibling or the descendent of any one of these. The child must be 18 or younger, 23 or younger if a full-time student, or permanently and totally disabled at the end of the tax year. The child must also have lived with you in the United States for more than half the tax year. Any child who does not meet all these criteria is unqualified as a dependent.
Dependent Care Credit
The dependent care credit is designed to help working taxpayers who must pay for dependent care so they can work. A qualifying child dependent must meet all the criteria required for the child tax credit, with the exception that the child cannot be older than 12 at the end of the tax year. Other qualifying dependents include your spouse or another dependent who lives in your home more than half the tax year and is mentally or physically disabled and unable to care for herself. Dependent care credit is also available if you have someone living in your home more than half the year who would have been your dependent, except his gross income exceeds the exemption amount, he has filed a joint tax return or he is the dependent of another taxpayer. Any individual not meeting these requirements is an unqualified person.
Education Credits for Dependents
The education credits available for your qualified dependents are the American Opportunity Credit, the Hope Credit and the Lifetime Learning Credit. To claim the American Opportunity Credit for a dependent, the dependent must by your qualifying child or spouse enrolled at least half-time in a qualified college or university and must not have already completed four years of college. The Hope Credit is available if you have a qualifying child or spouse enrolled at least half-time during the first two years of undergraduate education. The Lifetime Learning Credit is available for dependents if you have a qualifying child or spouse enrolled in a college or personal development course, but who is not eligible for one of the other education tax credits. You cannot claim more than one of these credits for the same dependent, and you cannot claim any of them for an unqualified person.