The 2017 TCJA eliminated the personal and dependent exemption deductions that applied to tax years before 2018, it increased the child tax credit available for years after 2017 and increased the income level at which taxpayers are eligible for the credit.
For 2019, if you file a joint return and your modified adjusted gross income (MAGI) is $400,000 or less, you are eligible for a $2,000 child tax credit for each qualifying child.
If you are filing as single, head of household, or married filing separately, the MAGI limitation for claiming a child tax credit is $200,000 or less. For income above those levels, a pro-rata credit may be available depending on total MAGI. Taxpayers with income below certain thresholds may be eligible for a refundable child tax credit.
*See updated tax deduction table
Only a portion of the tax credit will be refundable. Depending on your tax scenario, $1,400 will be the amount refundable with this credit.
Basic Scenarios:
Scenario 1: You have no tax liability; you will be refunded $1,400/ eligible child that you claim.
Scenario 2: If you have a tax liability of $1,000. A credit of $1,400 will be applied to the liability and you’ll be receiving the $400 remainder of the credit and erasing your tax liability.
Scenario 3: When you have a tax liability of $3,000. The full amount of $2,000 child tax credit will be applied to your tax liability; lowering what you owe in taxes to $1,000.
Child Tax credit eligibility
Your child will need to qualify for the following new requirements
- 16 years old or younger by the end of the tax year
- A US citizen or resident alien
- Your child should be living with you in the last 6 months
- Your child must have a Social Security number to qualify
- One major change in this bill is dependents that have ITIN number will not qualify for the tax credit.
Child care tax credit
If you paid someone to take care of your child or a dependent so you can work or look for work, you may be entitled to a tax credit for up to 35 percent of the expenses paid. The amount of employment-related expenses used to calculate the credit is generally limited to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. Various qualifications must be met in order to be eligible for the credit, but if you incurred such expenses, you may qualify.
Additionally, if you paid someone to come to your home and care for a child or dependent, you may be a household employer subject to employment taxes.
Tip: If you’re paying someone always pay them via check. It’ll have a trackable record that you can access when the IRS asks for proof. Better yet download your statements every month and store it in a folder on your computer.
Child Adoption Tax Credits
If you incurred expenses to adopt a child, you may be eligible for a tax credit of up to $13,810 for some or all of those expenses.
Points to know:
- The tax credit is nonrefundable
- The tax credit phases out when your income is $247,140.
- If you adopt a child with special needs, the adoption automatically qualifies for the maximum credit.
The determination of the tax year in which qualified adoption expenses are allowable as a credit depends on whether the expenses were paid before the year in which the adoption became final or whether they were paid during or after the year in which the adoption became final.
Tax season is here, organizing your documents and file your tax returns early can significantly reduce your stress and expedite your refund.
Our certified tax preparers are trained with the latest guidelines and updates with the IRS.
You’ll maximize your refund and have the confidence that your returns will be filled accurately.
Call us today if you have any questions.
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