Just over 40% of American family households have at least one child.
Although the number of family homes with children has decreased over the last several decades, they still make up nearly half of the households in the country. And if one of those households happens to be yours, you should know about the tax benefits that having children comes with.
The Family Tax Credit is one of those tax benefits. Changed in the 2018 tax year, there’s now more money available to you, your children, and maybe even other dependents.
Keep reading to learn what those credits are and how you qualify.
The Old Rules
Before 2018, people with dependents reduced their taxable income by the exemption amount for every dependent they claimed. The exemption amount was equal to $4,050 in 2017.
For the 2018 tax year, and moving forward, those exemptions have been replaced with new tax credits. These are:
- an increased Child Tax Credit
- an increased Additional Child Tax Credit
- a new Credit for other dependents
Below, we explore each of these changes in more detail.
More Money From the Family Tax Credit
Prior to 2018, people with children received a $1,000 credit per qualifying child on their annual tax return. The main change to the Family Tax Credit is an increase in that amount. You can now claim $2,000 for every child that qualifies.
In addition, $1,400 of that Child Tax Credit is refundable. Meaning that, even in the case you owe less than $1,400 in taxes, you can receive up to that amount as a tax refund.
New Credit for Other Dependents
Children over the age of 16 don’t qualify for the Child Tax Credit. However, they might qualify as a dependent under the TCJA.
In the case that they do, you may be eligible for a new $500 nonrefundable tax credit for other dependents. Be sure to check if your elderly or disabled dependents qualify under this tax credit as well.
And, if your child was adopted, you may be able to claim the expenses incurred, too. Learn more about the adoption credit if you have or are planning to adopt.
Qualifying for the Family Tax Credit
In order to be eligible for the Family Tax Credit, your child must meet certain requirements. These are:
- The child must be related to you. This includes biological children, stepchildren, foster children, adopted children, etc.
- The child must be under the age of 19 if they’re out of school or under 24 if they’re in school.
- The child must live with you for at least 6 months of the year. There are some exceptions to this rule.
- You must be financially supporting your child.
In addition, you have to be the only person claiming the child on your tax return. This eligibility requirement is important for divorced parents.
More Updates, News & Lifestyle
The Family Tax Credit changed for the 2018 tax year – and those changes might mean more money in your pocket. You can now claim up to $2,000 per eligible child on your tax return, and $1,400 of that is refundable. And, if you have dependents that don’t meet the eligibility criteria for the Child Tax Credit, you might qualify for the new Credit for Other Dependents.
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