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How The Expansion Of The Child Tax Credit Affects All Taxpayers With Dependents

Virtually every individual who files a federal income tax return for years 2018 or beyond will be affected by tax legislation approved in 2017. One of the changes brought about by the Tax Cuts and Jobs Act (TCJA) is an expansion of the child tax credit. Even some tax filers without children may now be eligible to claim a smaller credit similar to the child tax credit.

Increase in Credit Amounts

The most obvious change to the child tax credit is that the maximum credit amount has increased to $2,000 per qualifying child. The typical use of a tax credit is to offset income tax, but a portion of the child tax credit may be refundable. Up to $1,400 of the credit amount not used to offset tax may be received as a refund. All dependents are not children, however, so tax filers should be aware of the newly available family tax credit.

New Tax Credit for a Qualifying Relative

Tax filers can claim certain extended family members as dependents, as long as the requirements for a dependent are met. A tax dependent who is not a qualifying child is referred to as a qualifying relative. The TCJA adds a nonrefundable tax credit of up to $500 for each qualifying relative. Because of its nonrefundable status, the credit received for a qualifying relative cannot exceed your income tax otherwise payable.

New Tax Credit for Older Teenagers

Some tax filers are surprised to learn that the child tax credit is available only for children who are under age 17 at the end of the applicable tax year. The confusion seems to arise because the age limit for the child tax credit is slightly lower than the age limit for claiming a child as a dependent. As a small consolation to parents of older teenagers, the family tax credit can now be used after the child tax credit becomes unavailable.

A child claimed as a dependent generally must be under age 19 at the end of the applicable tax year. An exception is available for full-time college students under the age of 24 at the close of the applicable year. As a result, most parents are likely to be eligible to claim the family tax credit for at least a couple of years.

Increase in Eligible Taxpayers

In addition to the increased credit amounts, the TCJA also increases the number of tax filers eligible to claim the child tax credit. The income level at which the credit is no longer available is $240,000 for a single filer, and $440,000 for a married couple filing jointly. Contact a tax service, such as Balkcom Pearsall & Parrish CPA's PA, for more information about the financial implications of tax reform.


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