Did The Child Tax Credit Change For 2018

A tax credit reduces your total tax liability, and there are several types of credits available to help taxpayers practice just that. Traditionally popular credits are those related to children and are defined every bit child tax credits. Tax reform legislation in 2018 expanded the availability of revenue enhancement credits for children. Use these tips to decide if you can take advantage of a kid taxation credit.

a smiling husband and wife with their baby girl

Tax credits defined

Tax credits are valuable because each dollar of a tax credit reduces a dollar amount of tax liability. When a taxpayer has a $500 instruction tax credit, for example, the tax liability is reduced by $500. In short, if you owe $1,000 in tax, claiming the $500 teaching revenue enhancement credit reduces the corporeality you owe to $500.

If yous file an private revenue enhancement return, the taxation credits are calculated on page 2 of Class 1040.

Child tax credit

The child tax credit (CTC) has been available to taxpayers since 1998 and was created to aid offset the cost of raising children. Originally, taxpayers could have a $400 credit for each qualifying child under the age of 17. However, the credit changed over time. By 2017, the credit was worth $one,000 per qualifying child and was gradually phased out for single tax filers with an adjusted gross income (AGI) higher up $75,000 ($110,000 for joint filers).

The Revenue enhancement Cuts and Jobs Act (TCJA) is a tax reform bill that inverse the kid tax credit for tax year 2018. Hither are some important factors to notation:

Credit corporeality:

The child tax credit is at present $two,000 per qualifying child. The kid must be under 17 at the stop of the taxation twelvemonth (December 31) to claim information technology. The credit applies if the taxpayer claims the kid as a dependent and houses the child for at least half the yr.
Credit refunds:

If a taxpayer is owed a refund, the refundable portion of the credit increased to $ane,400 in 2018 (previously the credit was non-refundable). That ways if yous don't owe any tax before claiming the credit, you will receive up to $1,400 as function of your refund. The refundable amount will be adapted upward for aggrandizement.
Earned income threshold:

The income threshold to claim the credit lowered to $2,500 per family, which ways that a family must just earn $ii,500 or more to claim the credit.
Phaseout:

The CTC has a phase-out component, simply the AGI amounts are much higher as of revenue enhancement year 2018. The phase-out starts at $200,000 for a single taxpayer and $400,000 for articulation filers. The college phaseout levels permit more than taxpayers to take advantage of the CTC.

Continue in mind, nevertheless, that the increased CTC — likewise every bit the increased refundable portion of the credit — is currently set to expire after Dec 31, 2025. Parents and guardians also must provide the Social Security number (SSN) for the child. This rule was put in place to ensure the children are U.S. citizens.

Non-child dependent credit

The TCJA also allows a $500 credit for dependents who are not qualifying children nether age 17. There is no age limit for the $500 credit. Still, the potential dependent must notwithstanding meet tax tests for dependency. This credit may apply to taxpayers who support a dependent who is a full-time pupil or disabled.

Tax brackets

The U.S. computes each taxpayer's tax liability based on revenue enhancement tables, and the tables are dissimilar depending on your filing status. A taxpayer filing equally a single person will pay taxes at a unlike rate than 1 would if utilizing the married filing jointly condition.

Under the TCJA, the seven taxation subclass structure remains the same. However, the revenue enhancement rates decreased, and adjustments were made to the corresponding income levels. Use the Taxation Reform Calculator to estimate your revenue enhancement liability each yr.

Assistance is available

Taxation credits provide a dollar-for-dollar deduction on your tax liability. That means taking advantage of revenue enhancement credits can lower your tax neb. Computing a taxation credit can be complicated, only tax software similar TaxAct® can aid you decide how much of the credit you can merits.