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Your child tax credit and this year’s new tax reforms, explained

Posted on March 5, 2019

You already know that tax reform legislation is having an affect on this year’s tax returns for the good — or not so good – depending on your income bracket and individual circumstances.

We’ve been hearing from parents who claim the child tax credit and are curious about how 2018 child tax credit reforms will affect their bottom line.

Here’s the good news, according to our CPAs:

The new Child Tax Reform Credit increases the child tax credit from $1,000 to $2,000— which is welcome news for parents. Plus, eligibility factors for this credit have not changed. That’s great, too.

As in past years, a taxpayer can claim the Child Care Tax Reform Credit if all of these apply:

  • Child was younger than 17 at the end of the tax year
  • Taxpayer claims the child as a dependent
  • Child lives with the taxpayer for at least six months of the year

What about refunds? More good news. The credit is refundable up to $1,400. In other words, if a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their tax refund.

Earned income threshold has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.

Is there a phase out for high earning parents? Yes. The income threshold at which the child tax credit begins to phase out has been increased to $200,000, or $400,000 if married filing jointly. This means that more families with children younger than 17 qualify for the larger credit.

What about other dependents? Dependents who can’t be claimed for the child tax credit may still qualify for the new credit for other dependents. This is a non-refundable credit of up to $500 per qualifying person. Dependents may also be children who are age 17 or older at the end of the tax year. It also includes parents or other qualifying relatives supported by the taxpayer.

So, by and large, the new tax reform legislation is good news for most parents, say Teipen Selanders Poynter & Ayres CPAs. If you have questions or need more information, give us a call. Or check out
 IRS.govTax Reform Basics for Individuals and FamiliesTax Reform Small Business Initiative.