Changes to the Child Tax Credit and what it means for you
![Picture](/uploads/4/5/0/9/45094643/published/child-tax-credit.jpg?1548380599)
Do you have children living with you under the age of 17? Then you have come to the right page. The Child Tax Credit (CTC) has undergone many changes since its inception in 1998. Prior to the new tax reform named the Tax Cuts and Jobs Act (TCJA), the credit was worth up to $1000 per qualifying child. If a taxpayer earned at least $3000 for the tax year, they were eligible to receive the credit per qualifying child. The credit phased out (decreased) once the taxpayer reached certain income thresholds (above $75,000 for single filers and $110,000 for joint filers). We will look at how the CTC has changed for tax years 2018-2025. It's important to note that these changes expire after December 31, 2025.
What's changed under the new tax reform?
Looking at the comparison chart above, the Child Tax Credit doubled from $1000 to $2000 under the 2018 tax reform per qualifying child. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit). However the refundable portion of the credit is limited to $1400. The earned income threshold has been lowered to $2500. So taxpayers who earned at least $2500 for the tax year 2018 is eligible to take the credit for every qualified child. The phase out for the CTC has been increased to $200,000 ($400,000 for joint filers) so higher earning individuals are now able to take the credit. The qualifying child must have a valid SSN to qualify for the $2,000 Child Tax Credit. Unfortunately for married couples filing separately, they are unable to claim this credit.
Under the new laws, dependent exemption is eliminated (previously $4050 per qualifying dependent), but keeps the definition of dependent to claim the new CTC and other dependent related tax benefits. This means that in order for a taxpayer to claim the credit for the qualified child, the child must be related to the taxpayer (son, daughter, grandchild, etc.), must not provide more than half of their own support, and must live in the taxpayers home more than half of the year. For divorced or legally separated parents, there are special rules that apply.
Do you have more questions about the Child Tax Credit and how it affects you? Contact us today!
Do you have more questions about the Child Tax Credit and how it affects you? Contact us today!