This topic covers the effect of the Tax Cuts & Jobs Act, TCJA, of 2017 on a taxpayer’s ability to claim the Child Tax Credit, CTC.
One on the highlights of the TCJA is the expanded standard deductions for single, head of household or married taxpayers. As mentioned in the earlier letter, the standard deduction for single filers is increased to $12,000, for heads of household, $18,000 and for married filers, $24,000.
Generally, the CTC was non-refundable for 2017, but is refundable up to $1,400 for 2018. Taxpayers are also eligible for the Additional Child Tax Credit, ACTC. The ACTC is available if the amount of the credit you’re eligible for is greater than the amount you owe in tax. So, if you are claiming a qualifying child or children, and your income falls within the following tax brackets below, you will be entitled to the full CTC credit of $2,000 per qualifying child, providing you meet the eligibility rules posted below the table. The following tax brackets determine your credit.
The 2018 tax brackets are:
|Tax Rate||Individuals||Married Filing Jointly|
|12%||$9,526 to $38,700||$19,051 to $77,400|
|22%||38,701 to $82,500||$77,401 to $165,000|
|24%||$82,501 to $157,500||$165,001 to $315,000|
|32%||$157,501 to $200,000||$315,001 to $400,000|
Child Tax Credit Eligibility
Your annual income determines if you qualify for the credit. Again, if your income for 2018 falls with the ranges above, you can claim a full credit of $2,000 per qualifying child. If your income exceeds $200,000 for individuals and $400,000 for filing married filing jointly, the credit begins to phase out.
Eligibility for the Child Tax Credit, CTC, depends on two factors:
To be eligible for the credit, you must satisfy both factors:
- You must be the parent or guardian of the child, and
- The child must meet the following six tests.
- Age test: The child must be under age 17 in 2018;
- Relationship test: The child must be your son, daughter, foster or adopted child. Can also be a grandchild or descendant of your siblings;
- Support test: The child must not have provided over “one-half” of his/her own support, meaning money used for living expenses, (Social Security benefits do not count)
- Dependent test: The child must be claimed on your 2018 tax return;
- Citizenship test: The child must be a U.S. citizen, resident alien or U.S. National;
- Residency test: The child must have lived with you for more than half of the year (exceptions apply)
If you require more clarification on this issue, please contact my office.
In Part III and beyond, we’ll discuss how the TCJA impacts the Child & Dependent Care Credit followed by the Earned Income Credit and the Education Credit. Happy taxing!