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One of the largest
changes for The Tax Cuts and Jobs Act of 2018 has to do with the changes to the
child tax credit. Child tax credits are
available for low- and moderate-income families to help offset the costs of
children, and for qualifying filers, this can mean significant cost savings
when filing your taxes.
We now have a new
federal tax plan and one of the biggest benefits to the Trump Tax changes is
that the child tax credit has been changed from a non-refundable credit to
giving you up to $1400 refundable credit. The child
tax credit changesare
significant because this is a new opportunity for many Americans to potentially
put some hard-earned money back in their pockets.
There have been changes
to both the qualifications and credit amounts for filers, and the intent of
this article is to help summarize those changes that are applicable.
The new child tax credit
changes take effect immediately for your 2018 filed returns. As long as the child was not older than 17 by
the end of the filing year, they will qualify as part of the credit. With the new child tax changes, you can take
advantage of the broader eligibility requirements, and the credit amount per
child has now doubled!
The child tax changes
from the Tax Cuts and Jobs Act of 2018 are scheduled to remain in effect until
2025.
Since you are utilizing
a tax credit, you essentially are reducing your tax bill directly for each
child. Comparing this to a deduction
where you are lowering your taxable income only, a credit is a much more
advantageous position for filers.
In addition, since the
2018 tax laws changed the child tax credit to be refundable, this means you can
get some refund money back depending on your situation. The total amount you can get back from the
child tax credit depends on your specific tax situation, and the amount you get
back is capped at 15% your income.
There are complicated rules
associated with eligibility for the child tax credit, but luckily the IRS
publishes a ton of information online to help you determine if you
qualify. Some of the basic requirements
are that you must be the child’s legal guardian, they must be under the age of
17 during the tax year filed and a legal resident of the United States, and you
must be providing them financial assistance and claiming them as a dependent.
There also cannot be
multiple claims for the child tax credit on a single individual or child. You
may also be able to get
the child tax credit with no income.
You can claim the child
tax credit for individuals that are not your direct born children, but you must
be related in some fashion. If you are
the child’s legal guardian, such as an Aunt, Uncle, Adopting Parent, Foster
Child, Step Child, or sibling. So long
as you are providing financial support for the child and they are a dependent,
you are likely eligible to claim the child tax credit.
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