What is the phaseout for the child tax credit?

The amount you can take as a child tax credit is limited to $1,000 per child for the 2006 tax year. However, there is a phaseout for this credit which means that if your modified adjusted gross income is above a certain amount, you may not be able to deduct this full child tax credit amount (and if your modified adjusted gross income is too high, you will not be able to claim any credit at all).

For the 2006 tax year, the phaseout begins if your modified adjusted gross income is over the following amount:

1. If you are married and filing separately, the phaseout begins if your modified adjusted gross income is over $55,000.

2. If you are single, the head of household or a qualified widow or widower, the phaseout begins if your modified gross income is over $75,000.

3. If you are married filing jointly, the phaseout begins if your modified adjusted gross income is over $110,000.

If this phaseout applies to you, it basically works by requiring you to deduct $50 from the $1,000 child tax credit for every $1,000 that your modified adjusted gross income exceeds the phaseout amount. For example, if you are filing single and your modified adjusted gross income was $80,000, you must subtract $250 from your credit limit, meaning you can only claim a maximum child tax credit of $750 per child. As a result of this phaseout, if your modified adjusted gross income is more than $20,000 over the amount where the phaseout begins, your credit is reduced to zero and you have no credit to claim.