Children's ages, rebates and credits

I know a lot of parents are looking forward to getting some extra rebate cash based on little Jimmy or Janie. So I wanted to make sure everyone's aware of the age limit here.

Yes, it's unfair that you can't get the $300 per child bonus rebate for your older, but still dependent (in many ways) college kid. But c'est la taxes.

To qualify for the extra rebate money, the child must meet the child tax credit requirements. The key factor for rebate purposes is the age limit: the child must be younger than 17. And he or she must have been 16 or younger in 2007.

Although the rebate money is, in reality, an advance credit on your 2008 taxes, the IRS is using the 2007 tax year as a basis for this initial round of mailings that start in May.

And this actually works to the advantage of some parental taxpayers.

The rebate is officially a 2008 tax credit. You'll see it on that year's return in case you need to do some reconciling between the 2007 money and some additional funds you can claim next filing season. But any recalculations next year will be if your tax situation in 2008 changed from 2007's info and you can get more money next year.

You'll have no rebate worries if your kid celebrates his or her 17th birthday any time in 2008. You still get the stimulus package payback this summer based on the youngster's 2007 tax year age. And you won't have to give it back next year if your child is too old, for 2008 tax-filing purposes, to meet the child tax credit eligibility rules.

Letters on the way: You should be on the lookout in your snail mail boxes for some IRS info coming your way in the next couple of weeks. The IRS will be sending a couple of letters to more than 130 million households reminding folks of the rebate requirements.

The first mailing will be an informational notice, titled Economic Stimulus Payment Notice, alerting folks that they may be eligible for a the one-time payment.

"This special letter reminds people that they won't need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion," said Acting IRS Commissioner Linda Stiff.

A second mailing will go out in late March. It will be for certain recipients of Social Security and Veterans Affairs benefits, and will provide details on how those individuals can get their $300 checks. If you don't want to wait for the letter, check out my blog item on Filing mom's tax return.

Getting credit(s) for your kids: The child tax credit has been around since 1997. It got a boost in the 2001 tax bill when it was doubled to its current $1,000 per child amount.

For most people, claiming the credit is a piece of cake. You have a kid. The kid has a Social Security number. The kid is younger than age 17 at the end of the tax year. The kid lived with you for more than six months during the tax year. The kid cuts $1,000 off your tax bill.

Of course, taxes are never that simple. So here are the rest of the things to think about if your family, like many nowadays, doesn't follow the June and Ward Cleaver prototype. A child is your qualifying child for the child tax credit if he or she:                 

1. Is a citizen, resident, or national of the United States,
2. Is under age 17 at the end of the calendar year in which your tax year begins,                         
3. Is your son, daughter, stepson, stepdaughter, legally adopted child (or a child lawfully placed with you for legal adoption), brother, sister, stepbrother, stepsister, foster child placed with you by an authorized placement agency or by a court order, or a descendant of any such person,
4. Shares with you the same principal place of abode for more than one-half of the tax year, or is treated as your qualifying child under the special rule for parents who are divorced, separated, or living apart, and
5. Is not treated as the qualifying child of another taxpayer under the special rule for two or more taxpayers claiming a qualifying child or the special rule for parents who are divorced, separated, or living apart.    

There also are income limits, depending on your filing status, which could mean your credit is phased out. For 2007, they are:

• $110,000 for married filing jointly taxpayers,
• $75,000 for single, head of household or qualifying widow or widowers, and
• $55,000 for married taxpayers filing separate returns.

Finally, note that the child tax credit is nonrefundable. That means it can help get your tax bill to zero, but won't get you a refund. However, your kids might be able to get you money back from the IRS via the additional child tax credit.

You can read more about the child tax and additional child tax credits in this story, as well as in IRS Publication 972, Child Tax Credit.                   

The forms you'll need, and which have additional information (including a child tax credit worksheet), are Form 1040 and its Instructions or Form 1040A and its Instructions. You'll file Form 8812 to claim the additional child tax credit.