CCH INCORPORATED

(RIVERWOODS, ILL., January 2006) – The U.S. Department of Agriculture estimates that a middle-income family will spend more than $233,000 raising a child born in 2000 through age 17. But beginning in the 1990s, there has been increasing help with that burden in the form of credits, exemptions and deductions for kids at tax time, according to CCH, a Wolters Kluwer business and a leading provider of tax and accounting information, software and services (tax.cchgroup.com).

One important change for 2005 brought about by the Working Families Tax Relief Act of 2004 is a new uniform definition of child for purposes of the dependency exemption, the child tax credit, the childcare credit, head of household filing status and the earned income credit. The new requirements focus on a relationship test and a support test. In general, they are somewhat more generous than the old requirements, but may work to the disadvantage of non-parents who nevertheless financially support children who live in their homes.

Following, CCH outlines some simple guidance on the basic tax credits available and the rules for kids’ income.

Credit/ Exemption	Applies to	Amounts for 2005 Taxes
Child Credit	Individuals/joint filers with dependents under age 17.	$1,000 per child, phasing out when adjusted gross income (AGI) exceeds $75,000 for single filers and $110,000 for joint filers. Phases out at a rate of $50 of credit loss per $1,000 of AGI beyond the above incomes, with the upper phase-out range depending on the number of children claimed.
Personal Exemption	Individuals/joint filers with dependent children under age 19 or, if full-time student, under age 24.	Maximum exemption parent(s) can claim on return is $3,200. For divorced parents filing separately, generally the exemption goes to parent who has custody for the greater part of the year.
Childcare Tax Credit	Individuals/joint filers with childcare expenses for children up to age 13, or older children if they are physically or mentally incapable of caring for themselves.	Credit taken against maximum qualifying expenses of $3,000 for one qualifying dependent and $6,000 for two or more. Credit equals 35 percent of qualifying expenses for taxpayers with AGI up to $15,000 and decreases with income to 20 percent of allowable expenses for AGI of $43,000 or more.
Adoption Credit	Individuals/joint filers adopting children under age 18.	Maximum credit of $10,630 for a regular adoption, with credit amounts phased out at incomes between $159,450 and $199,450 for both single filers and joint filers. For a special needs adoption, the credit is figured without regard to the actual expenses paid or incurred in the year the adoption becomes final.
Filing – tied to Standard Deduction	All dependents.	Must file a tax return if they have more than $800 in unearned income, or earned income over $5,000 – or, if their total income was more than the larger of $800 or their earned income (up to $4,750) plus $250.
Earned Income – paid by an employer	All dependents.	The standard amount of earned income exempt from income taxes is $5,000. Anything above this is taxed at the child’s income bracket. Although a return is not required with income below $5,000, a child with less income may want to file to obtain refund of withheld taxes.
Earned Income – self-employed	All dependents.	The standard amount of earned income exempt from income taxes remains $5,000. However, the child must pay self-employment tax for Social Security and Medicare on any self-employment income greater than $400.
Unearned Income –interest, dividends, capital gains	Varies based on age of dependent.*	Children under age 14: Unearned income above $1,600 is taxed at the parents’ income rate. Children 14 and over: Unearned income is taxed at the child’s tax rate, regardless of the parents’ income tax bracket.

*Parents can elect to include the unearned income of a child under the age of 14 whose income is less than $8,000 on their return by filing IRS Form 8814 along with the parents’ return. However, while combining the child’s income with the parents eliminates the need for the child to file his own tax return, it will increase the parents’ adjusted gross income (AGI) and, therefore, possibly reduce the parents’ deductions or other potential tax breaks.

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (tax.cchgroup.com) is a leading provider of tax, audit and accounting information, software and services. It has served tax, accounting and business professionals and their clients since 1913. Among its market-leading products are The ProSystem fx® Office, CCH® Tax Research NetWork™, Accounting Research Manager™ and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.

Wolters Kluwer is a leading multinational publisher and information services company. Wolters Kluwer has annual revenues (2004) of €3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands (www.wolterskluwer.com). Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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About CCH, a Wolters Kluwer business