- The child tax credit has been increased by $1,000.
- The child tax credit is now partially refundable.
- Eligibility requirements of the child tax credit remain the same.
Raising a child requires a big cash outlay. You might, however, be able to get some of that money back when it’s time to file your tax return. Thanks to new tax law changes, the child tax credit looks a lot different in 2018.
In order to take advantage, you’ll want to learn who’s eligible for the child tax credit, how much it is and how to claim it. Review these six things you need to know about the child tax credit so that you don’t miss out on a deduction you’re entitled to take.
What Is the Child Tax Credit and How Much Is It for 2018?
The child tax credit (CTC) provides a credit of up to $2,000 per qualifying child, a $1,000 increase from 2017. The increase is a result of the Tax Cuts and Jobs Act of 2017. Most of the changes from the TCJA took effect in January 2018.
Who Can Claim the Child Tax Credit?
To qualify for the child tax credit, a child must meet several requirements. See if your child meets these conditions:
- Your child must be 16 or younger at the end of the year.
- A qualifying child can be your child, stepchild, adopted child, foster child, sibling, stepsibling, half sibling or a descendant of one of them, such as your grandchild, niece or nephew.
- The child must live with you for more than half the tax year. Exceptions apply, however, if he or she is away for military service, vacation, business, medical care or detention in a juvenile facility. You can also claim the child tax credit if your child was born or died during the tax year. Some additional exceptions also apply for children with divorced or separated parents.
- The child cannot pay for more than half of his or her own expenses.
- You must claim the child as your dependent on your tax return.
- The child must be a U.S. citizen, U.S. national or U.S. resident alien and have a Social Security or individual taxpayer ID number.
Know Before You File: 16 Commonly Missed Tax Deductions
Tiebreakers if Multiple People Can Claim a Child
Only one person can claim a child. If more than one person is eligible to claim the child, the IRS uses these tiebreaker rules to determine who can claim the credit:
- The child’s parent or both parents if they file jointly.
- The parent with whom the child lived most during the year.
- The parent with the highest adjusted gross income.
- If no parents can claim the child, the person with the highest adjusted gross income.
How to Claim the Child Tax Credit
First, make sure your child is eligible. When you file your income taxes, use Form 1040 to claim the credit. If your qualifying child has an ITIN instead of a Social Security number, you will also need to file Schedule 8812.
Is the Child Tax Credit Refundable?
Before the Tax Cuts and Jobs Act, the child tax credit was nonrefundable, which meant that if you had a lower tax liability than the amount of the credit, you wouldn’t receive the credit for a refund. Prior to the recent tax reform, the additional child tax credit was the only way you could get a portion of your child tax credit back in a refund. But under the new tax law, up to $1,400 of the child tax credit is refundable. Moreover, the new tax law limits the total of your refundable child tax credit to 15 percent of your earned income that exceeds $4,500, according to SmartAsset.
Be Aware of the Income Limit and How It Works
The higher your income level is, the less chance you have of claiming the full child tax credit. For married couples planning to file a joint tax return, the child tax credit begins to phase out for taxpayers with an adjusted gross income that exceeds $400,000. But for all other taxpayers, the amount is $200,000.
Keep Reading: 16 Biggest Tax Questions for Single-Income Families
Get the Most Out of Your Child Tax Credit
The child tax credit could save you up to $2,000 — for each qualifying child — each tax year. Here are a few questions and answers that will help you get the most out of your child tax credit.
What Is the Child Tax Credit on a W-4?
A W-4 helps your employer determine how much federal income tax to withhold from your paycheck, and Line G on a W-4 is where parents or guardians indicate whether or not they have children that qualify for the child tax credit. Depending on the amount of the child tax credit you receive, you might need to increase the number of allowances you claim to avoid having too much withheld from your paycheck.
Should Child Care Expenses Be Included?
Unlike the child and dependent care credit, you don’t have to show that you had any child care expenses — like after-school care — to claim the child tax credit. The amount is fixed regardless of your expenses; however, you can use those expenses to claim the child and dependent care tax credit. You cannot claim more than $3,000 for one qualifying person.
Click through to read more about the tax breaks you should know about for your filing.
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