There are many tax breaks that you may take if you have a qualifying child. Unfortunately, there is no single definition for all of these tax breaks. Here are the different definitions; you may be eligible for one or more of these tax breaks.
The same definition of a qualifying child is used for the following purposes:
The basic rules require all of the following conditions to be met:
Earned income tax credit
While workers with no qualifying child can receive a modest earned income tax credit (EITC), the amount of the credit grows with the number of qualifying children. Basically, the definitions are the same. However, until now there was some distinction for an “authorized placement agency” for a child placed in a taxpayer’s home for adoption. There was also a difference in the definition of figuring income in the case of a “tie breaker” (where two or more taxpayers are potentially eligible to claim the child as a dependent and to claim the earned income tax credit).
The IRS has proposed regulations that would conform the definition of a qualifying child for the dependency exemption with the definition for the EITC. The proposed regulations provide that if a taxpayer meets the definition for a qualifying child for purposes of the dependency exemption but cannot be claimed because of the tie-breaker rule, then the child is not a qualifying child for purposes of the EITC. However, the taxpayer may still claim the modest EITC without a qualifying child. While these regulations are not effective until they are finalized, taxpayers may choose to apply them to any open tax year.
Child tax credit
The child tax credit has a specific age limit. The child cannot have reached the age of 17 by the end of the year. This age limit applies regardless of whether the child is permanently and totally disabled.
Dependent care credit
The child and dependent care credit has its own specific age limit. Only expenses up until the child becomes 13 years old can be taken into account. Thus, if a child turns age 13 during the year, expenses up to the 13th birthday can be part of the tax credit; expenses thereafter cannot.
If the child is older than age 13 but is physically or mentally incapable of self-care, the child is still a qualifying child for this purpose.
Contributions to an account for a Coverdell Education Savings Account (ESA) are permitted only until the child reaches age 18. However, contributions can continue to be made for an older child who is considered a “special needs beneficiary.” This is someone who requires additional time to complete an education because of a physical, mental, or emotional condition.
Contributions to an account for a disabled individual can only be made if the disability occurred before the age of 26.
If you are supporting or contributing to the support of your child, be sure to review all of the potential tax breaks available to you. Then determine which ones can be claimed based on the varying definitions.