The child tax credit is worth up to $1,000 for each qualifying child on 2006 returns. So, four qualifying children could reduce your tax bill by $4,000. That could boost your refund significantly.
Although the concept of the child tax credit sounds straightforward enough, calculating your credit can be complicated, depending on your personal tax situation. But don't worry-we handle all these calculations for you!
The basic idea is that qualifying parents can take a credit of $1,000 for each qualifying child. To qualify, a child must meet ALL these requirements:
For you to qualify to claim the full $1,000 credit, your adjusted gross income must be $75,000 or less ($110,000 if filing jointly, $55,000 if married filing separately). Each $1,000 you make over that amount results in the loss of $50 of credit. That's $50, not $50 per child. Thus, if you have two qualifying children and your AGI is $500 over the threshold, your credits would total $1,950 ($1,000 for each child minus $50 for being $500 over the threshold).
At the other end of the income scale, the child tax credit can actually put cash in your pocket. Like the earned income credit, the child tax credit can be "refundable", meaning that if it would reduce your tax bill to less than zero, the IRS would send you a check for at least part of the difference. The rules here are complicated, even by tax standards.