Here’s how the new tax law revised family tax credits
More families will be able to get more money under the newly-revised Child Tax Credit, according to the Internal Revenue Service.
The Tax Cuts and Jobs Act (TCJA), the tax reform legislation passed in December 2017, doubled the maximum Child Tax Credit, boosted income limits to be able to claim the credit, and revised the identification number requirement for 2018 and subsequent years. The new law also created a second smaller credit of up to $500 per dependent aimed at taxpayers supporting older children and other relatives who do not qualify for the Child Tax Credit.
Here are some important things taxpayers need to know as they plan for the tax-filing season in early 2019:
Child Tax Credit increased
Higher income limits mean more families are now eligible for the Child Tax Credit. The credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly, which is up from the 2017 levels of $75,000 for single filers or $110,000 for married couples filing jointly.
Increased from $1,000 to $2,000 per qualifying child, the credit applies if the child is younger than 17 at the end of the tax year, the taxpayer claims the child as a dependent, and the child lives with the taxpayer for more than six months of the year. The qualifying child must also have a valid Social Security Number issued before the due date of the tax return, including extensions.
Up to $1,400 of the credit can be refundable for each qualifying child. This means an eligible taxpayer may get a refund even if they don’t owe any tax.
New Credit for Other Dependents
A new tax credit – Credit for Other Dependents — is available for dependents for whom taxpayers cannot claim the Child Tax Credit. These dependents may include dependent children who are age 17 or older at the end of 2018 or parents or other qualifying relatives supported by the taxpayer.
The IRS offer an Interactive Tax Assistant to see if you qualify for either of these credits.