Many people claim the child tax credit to help offset the increasing cost of raising children. The Tax Reform enacted last year made changes to that credit. If you have children, here’s what you need to know about the changes made to the Child Tax Credit for the 2018 tax year:
- Credit amount is being doubled. The new law increases the child tax credit from $1,000 to $2,000. Eligibility for the credit has not changed. As in past years, the credit applies if all of these apply:
- the child is younger than 17 at the end of the tax year, December 31, 2018
- the taxpayer claims the child as a dependent
- the child lives with the taxpayer for at least six months of the year
- More of the credit is refundable. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund.
- Earned income thresholds are rising. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
- Phaseout is increasing. The income threshold at which the child tax credit begins to phase out is 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.
Dependents who can’t be claimed for the child tax credit may still qualify the taxpayer for the credit for other dependents. This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of 2018. It also includes parents or other qualifying relatives supported by the taxpayer.