Tax Benefits of Having Children
Every parent knows that raising a child comes with many joys and difficulties. Those sleepless nights become a distant memory as you watch your child grow, mature, and flourish year by year. Every parent also knows that raising a child comes with a financial cost. Thankfully, the IRS understands that burden and has given taxpayers the ability to claim a tax credit for 2018.
With the new Tax Cuts and Jobs Act, personal and dependent exemptions will no longer be available to taxpayers. However, they’re adjusting the Child Tax Credit to compensate for the removal of the dependent exemptions. Here is a list of the following changes to the Child Tax Credit:
- Credit is doubled from $1,000/child to $2,000/child.
- Refundable amount is increased from $1,100 to $1,400.
- Threshold AGI (Adjusted Gross Income) at which benefits phase out is increased from $110,000 to $400,000 for those filing as married filing jointly.
- All other filers will have benefits phase out at $200,000.
- Additional $500 credit for each dependent that is not a “qualifying child.”
A “qualifying child” must:
- Be under the age of 17;
- Be the taxpayer’s child, or descendant of the child, sibling, step-sibling, or a descendant of the sibling or step-sibling;
- Reside with the taxpayer for more than half the year;
- Be financially dependent (cannot provide more than half of his or her own support).
In short, if you’re raising a “qualified child” and your adjusted gross income is not over the threshold, then you should expect to receive the full $2,000 credit per child.
If you ever have any questions about the credit or are unsure if your child is a “qualifying child,” feel free to give us a call!