 Hello and welcome to this session in which we will discuss the child tax credit now The child tax credit was added to it the term family tax credit and we're gonna see why in a moment So what is the purpose of the child tax credit? Well, it's a benefit Designed to help families with what with raising children So if you have children the US government wants to help you raise those children It's simply put it's a provision of the tax code that provide financial help To qualifying taxpayer that have dependent children Well, the main goal is to reduce the tax burden of the family to help you raise a family Especially it's gonna benefit the most people with lower and middle income and to provide additional Financial support to help raise the children. That's the whole purpose of it before we proceed any further I have a public announcement about my company farhat lectures calm Farhat accounting lectures is a supplemental educational tool That's gonna help you with your CPA exam preparation as well as your accounting courses My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of Lectures multiple choice questions through false questions as well as exercises go ahead start your free trial today No obligation no credit card required So who's eligible for this child tax credit? Well to qualify for the child tax credit You must have a qualifying child now. What is a qualifying child? We discussed qualifying child in a separate recording But that qualifying child Under the age of 17 very important by the end of the tax year 1231 So a child a qualifying child under the age of 17 now qualifying children could include dependent children Subchildren grandchildren siblings nieces and nephews those are included the child also Must be a US citizen or a resident alien have a social security number so it's a person that exists not a pat and Must be claimed as a dependent on your federal income tax return So if you don't know the dependency rules and the qualifying child make sure you view those related lectures But that's all what you need to know for the eligibility now. How much Do you get in a for a child tax credit? Well the amount is $2,000 and the amount is refundable Well, certain tax credit are refundable others are not what is a refundable tax credit a refundable Tax credit means even if you have a zero tax liability, you don't owe the government any money. You have zero tax liability Nevertheless, we will give you the $2,000. So if you owe the government $400. This is how much is your tax bill Here comes the child tax credit. It will wipe out your bill And gives you a check. They will send you a check for 1600. Why because this this is a refundable If the tax if the child tax credit was not refundable, then what's gonna happen if you owe the government $400 Then you could only use $400 to bring your liability down to zero. Well, the child tax credit is refundable It's gonna go above and beyond even if you don't owe the government any money You'll get the additional 2000 now bear in mind. There's a phase out and the phase out now I'm gonna show you the phase out for the For now, but these phase out could change. It doesn't matter whether you are in year 25 Or year 27. The concept is the same. However, the phase out will change now if you're studying for the CPA exam The phase out amount will be given to you. That's not a problem. You don't have to memorize the phase out However, you have to know how to compute the reduction in the in the amount of the tax credit And I'm gonna show you how but for now we're gonna we're gonna use phase out If you're merit filing jointly once you go above 400,000 you will start to lose and once you go above 200,000 As a single or anything other than merit filing jointly your child tax credit will be reduced now How much will it be reduced by well? The credit is reduced $50 for each $1,000 or the fraction of that that's over the amount of the threshold And you would always round up So simply put if you're merit filing jointly And you're modified adjusted gross income or adjusted gross income is 40,500 You're gonna round up to 40,000 and a thousand. So this 500 becomes a thousand and you are 1000 above It means you have to reduce your credit by $50 So rather than 2,000 your credit becomes 1,950 and you'll keep reducing this until your credit goes down to zero Now, why did we say this credit now? It's called family tax credit The reason is because they added to this something called a family credit or a 500 non refundable family credit So if you have someone in your household Like maybe another child Over the age of 18 means over 18, but less than 24 full-time students But they're qualifying dependent, but they are not qualifying children. They are qualifying dependent The government will give you an additional 500 notice. This is a non refundable So if you have a child who's above 17 which is 18 to 24 full-time student They don't qualify As a qualifying child for the child tax credit, but they would they would qualify under the family tax credit and that amount Is $500 but that amount is non refundable. So if you if you don't have a tax liability You don't you don't take advantage of this or if you have elderly parents living with you Is qualifying dependent or then they will qualify you for this additional $500 and that's why it's called family slash Child tax credit. It was always known by the child tax credit Let's take a look at few example. Now. We have a single parent with a modifying adjusted gross income of 213,200 and one child age five Now we're going to compute the child tax credit for this For this single parent. Well, here's what's going to happen Generally speaking, what's the amount of the credit generally speaking the amount of the credit is 2000 However, this is since it's a single. It means it's not married a single parent What's going to happen is we're going to be subject to the limitation How do we know how much do we qualify for? Well, we said anything other than married Filing jointly you're going to have to start to Cut down on this credit above 200 000. Now the individual Is would have a modified adjusted gross income or adjusted gross income of 213,200 which is 13,200 above well 13,200 basically you have to round it up to 14,000 because we're going to divide by a thousand So if we're going to go 13,200 divide by a thousand we are 13.2 points above The threshold well, we're going to round up to 14 now. We are 14 multiples 14 $1,000 above for each one. We're going to reduce it for each thousand. We're going to reduce the credit by 50 We're going to reduce the credit by 700 therefore the credit initially is 2000 minus 700 because we are we are above the threshold And the amount is 1300 Let's take a look at another example a single parent with a modified of 92,000 with three children six 10 and 11 Good six three and 11 three children each 2000 Well, the individual is below 200,000 the amount of credit is $6,000 Let's take a look net now at a married couple Filing jointly with a modified of 407 368 and two children ages 13 and 15 Now if we don't if we were not above the 400,000 This married couple would qualify for the 4,000 But since we are above 400,000 we have to compute The limitation so we are 4,368 above this amount We'll take this amount divided by 1,000 And 7.37 we always round up we round up to 8 now We're going to take 8 multiplied by 50 dollars and we're going to lose 400 dollar from the credit So it's going to be 4,000 minus 400 the amount is 3,600 let's take a look at another example a married couple Filing jointly with a modified AGI of 133,098 with one child age 12 How much is the credit? Well, the credit is 2,000 There below the threshold the amount is 2,000 no limitation applies here What should you do now go to far hat lectures? Look at additional resources multiple choice through false additional lectures That's going to help you with your tax credit Accounting courses CPA exam or whatever accounting certification enrolled agent or any other accounting certification that you are studying for Good luck study hard and of course stay safe