Q. I’m getting Social Security disability and working 20 hours a week. My 7-year-old grandson and his mom live with me. She does not work. Can I claim my grandson on my taxes without affecting my disability so I can get the child income tax credit? I do help with his care.
— Grandma
A. We’ve got some good news for you.
First, let’s cover your Social Security Disability Income (SSDI) benefits.
If you can engage in what the Social Security Administration (SSA) calls “substantial gainful activity” (SGA), you won’t be eligible for SSDI benefits.
A person who earns more than a certain monthly amount is considered to be “engaging in SGA,” said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.
He said federal regulations use the national average wage index to set the income limit for determining the SGA each year.
“In 2020, the amount is $1,260 for disabled applicants and $2,110 for blind applicants,” he said. “The rules differ for business owners, since their monthly income may not reflect the work effort they put into their business.”
Claiming a child as a dependent and taking the child tax credit if you qualify does not impact your SSDI, he said. You are entitled to those tax breaks as long as you qualify to take them like any other taxpayer.
Next let’s review the IRS rules for claiming the child tax credit on a 2020 federal income tax return.
In order for you to get the child tax credit you must meet seven requirements, Maye said:
1. Age: The child must be under 17.2. Relationship: A grandchild qualifies3. Support: You must have provided 50% or more of child’s support4. You must qualify to and claim the child as a dependent on your tax return5. Citizenship test: The child must be U.S. citizen or U.S. national or U.S. resident alien6. Residency test: The child must live with you for 50% or more of the year7. Family income test: The phaseout begins at $200,000 for singles and $400,00 for those married filing jointly.
Based on the limited information provided it appears you likely would be able to claim the child as a dependent and also claim the child tax credit if you have earned income on your 2020 tax return, Maye said.
For 2020 for purposes of calculating the child tax credit, the floor for earned income is $2,500.
For example, he said, at an earned income level of $12,000, assuming you are single, the child tax credit would be $1,400. As your earned income rises, it increases the child tax credit until it hits a maximum of $2,000, Maye said. And it would be phased out entirely for higher income earners, she said.
The other good news is that starting 2021, the child tax credit has been expanded to as much as $3,600 for children under the age of 6 and $3,000 for children age 6 to 17, Maye said.
The expanded credit is subject to phase-outs starting at $75,000 for single taxpayers and $150,000 for taxpayers filing jointly.
In addition, the $2,500 in earned income requirement has been removed as well, he said.
For higher income earners, they would still be eligible to receive the $2,000 child tax child credit with the previously 2020 higher phase-out limits.
“Finally, the government plans to start distributing the child tax credits for 2021 in July so qualified individuals would not have to wait till they file their 2021 tax return,” Maye said, noting the IRS’ timing on payouts could change. “Before claiming the child tax credit, confirm that your daughter did not receive the child tax credit herself, particularly for 2021, in case she receives any advance child care tax credit payments.”
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
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