Recent tax law changes in effect
Dear Mr. Priest: You recently wrote about the child tax credit. I checked with my accountant about the child tax credit, and he said I’m not going to receive it because it phases out at higher income levels. Is he correct on this?
I could understand how this could be the case if it were a deduction rather than a credit. But since it’s a credit and I have children, I would think it would be available to all income taxpayers regardless of income level. Who’s right?
– Shep, Denver
Dear Shep: I hate to be the bearer of bad news, but your accountant is most likely correct on this. As readers will recall from my previous article, recent changes in the tax laws have increased the child tax credit from $600 per qualifying child to $1,000 effective in 2003 and 2004.
Many citizens are eligible for an “advance payment check” of up to $400 for each qualifying child. However, if you did not apply for the credit in 2002, then you will not get the “advance payment check” in 2003.
Furthermore, the child tax credit does phase out at higher income levels. For married couples filing jointly, the credit begins to phase out when their adjusted gross income exceeds $110,000. For married couples filing separately, it’s $55,000, and for all others it starts to phase out at $75,000. For every $1,000 increment above these amounts, the total credit is reduced by $50. For example, if you are married and filing jointly with one qualifying child, your AGI would have to be above $130,000 in the year 2003 to be completely phased out of the credit. Happy Planning!
Bob Priest, MBA, CFP, is an independent certified financial planner and registered investment advisor serving clients locally and nationally. He can be reached at (877) BOB PRIEST or on his Web site at http://www.BobPriestFinancial.com. All opinions herein are those of the author and not of the Summit Daily News or its staff. Submit your financial questions to Bob@FinancialCompanies.com.
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