According to the Internal Revenue Service (IRS), “The IRS will begin accepting tax returns on Jan. 29, with nearly 155 million individual tax returns expected to be filed in 2018. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15.”
If you’re a parent of a minor child, you will be interested in learning about the 2018 changes to the Child Tax Credit, which affects both parents and guardians of children who are under the age of 17 in all 50 states.
In a nutshell, the Child Tax credit was doubled in 2018. In 2018, the Child Tax Credit went from $1,000 in 2017 to $2,000 in 2018. So, if you have one child, you will be able to claim a $2,000 credit and if you have two children, you can claim a $4,000 credit, and so on.
It is a ‘Credit’ Not a Deduction
It’s important to note that it’s a “credit” not a “deduction.” While a deduction reduces your taxable income, a credit operates differently; it reduces the taxes you owe dollar-for-dollar. For example, let’s say you’re an independent contractor who is on 1099s and you owe the IRS $10,000 this year and you have two children. Since you owe $10,000, you deduct the $4,000 from your tax credit – now your tax bill is only $6,000.
Another big change to the Child Tax Credit in 2018 is the income qualification. Prior to 2018, the Child Tax Credit was only available to low and middle-income taxpayers. For example, in 2017, you could not use the credit if you were married and filing jointly and had a household income above $110,000. In 2018, the threshold for married filers was increased to $400,000. If you are getting a divorce, continue reading.
When parents are divorced, as a general rule, only one parent can claim all of the child-related tax benefits for their children, including the Child Tax Credit. For details, we suggest reading the IRS’s page entitled, “Divorced and Separated Parents.”