Child Tax Credit

In 2005, with the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child. Because Congress passed a law in September 2004 to keep the credit at $1,000 until 2010.

According to IRS, a qualifying child is a child who:
1. Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them,
2. Was under age 17 at the end of 2005,
3. Did not provide over half of his or her own support for 2005,
4. Lived with you for more than half of 2005 and
5. Was a U.S. citizen, a U.S. national, or a resident of the United States.

But there are two limits on this credit:
1. You can't claim a child tax credit that is more than your income tax liability. But you may be able to claim some or all of the difference as an "additional" Child Tax Credit.
2. Depending on your filing status, the phase out of the credit begins at the following levels of modified AGI:
Married Filing Jointly: $110,000Married Filing Separately: $55,000Other Filing Status: $75,000

To claim the Child Tax Credit, you must file on form 1040 or 1040A. You can't claim the credit on Form 1040EZ.