At Christianson, we often get similar questions from our clients that we feel should be addressed on a larger scale. We believe that the question may be something that is asked universally, and not just in our office. The Child Tax Credit is a topic of discussion, especially now that the recent Tax Reform Bill has made a modification to the credit amount.
Changes Taking Place in 2018
Under the Tax Cuts and Jobs Act, the Child Tax Credit will change as outlined below per the IRS. Please note that the qualifiers are listed below the changes so you know who may be eligible for this credit.
- The CTC has gone up to $2,000 per qualifying child as opposed to the previous credit of $1,000.
- The refundable portion is limited to $1,400. This amount will be adjusted for inflation after 2018.
- The earned income threshold for the refundable credit is lowered to $2,500.
- The beginning phaseout increases to $200,000 ($400,000 for joint filers).
- The child must have a valid SSN to claim the nonrefundable and refundable credit.
Qualifiers For Child
One of the primary questions relating to this topic is: how do I know if my child(ren) will qualify for the credit for this year? The answer is not as simple as you may think, so here are some guidelines provided by the IRS:
- The most commonly misunderstood criteria for the Child Tax Credit is age: Your child must have been under age 17 (16 or younger) at the end of the tax year for which you claim the credit.
- Relationship: The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. An adopted child is always treated as your own.
- Financial Support – To qualify, the child must not have provided more than half of his or her own financial support during the tax year.
- Dependent – The child must be claimed as a dependent on your federal income tax return.
- Citizenship – The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Residence – The child must have lived with you for more than half of the tax year. A child who was born (or died) during the tax year is considered to have lived with you the entire year.
**Please note: The Tax Reform Bill also includes a new Family Tax Credit which allows a $500 credit (per dependent) for any of your dependents who do not qualify as children under 17. There is no age limit for the $500, but the tax tests for dependency must be met. As a result, a partial credit might apply to a child under age 19, a full-time student under age 24, a disabled child of any age, and other qualifying relatives who meet certain requirements.
If you have questions as it relates to the Child Tax Credit, reach out to your tax professional or contact Christianson today!