How Kids Will Affect Your Taxes This Year
It’s that time of the year when your stack of W2s, 1099s, charitable donations, and the like come to life. This year you’re not looking for tax deductions; you’re looking for tax credits relating to your children. This is one of the most significant changes that came with the Tax Cuts and Jobs Act of 2017.
If you can claim your child as a dependent, you may be eligible for a child tax credit, which is actually even better than a tax deduction because it reduces your taxes dollar for dollar. The child tax credit for children under 17 doubled to a $2,000 credit under the new tax law. You can claim the child tax credit if you’re filing jointly as a couple and earn less than $400,000. Single parents can earn up to $200,000.
For those paying for child care, there is still the child and dependent care credit on top of the child tax credit. This credit is a dollar-for-dollar reduction of your taxes, determined by your child and dependent care expenses. For one child you receive up to 35% of $3,000 ($1,050) or $6,000 ($2,100) for two or more children. Depending on your income, the credit ranges from 20% – 35% of your child care expenses. What qualifies? Nursery school, after-school programs, daycare, and private kindergarten. For single parents earning less than $41,094 a year, there’s a chance you will qualify for the earned income tax credit.
Did you adopt a child in 2019? Congratulations to you and your growing family. Don’t forget about the adoption tax credit. For adoptions completed in 2019, there is a federal adoption tax credit of up to $14,080 per child. This tax credit covers travel, legal, and meal fees relating to the adoption process.
If you have a child in college, there are two credits you could possibly claim: the American opportunity tax credit and the lifetime learning credit. There are salary caps and specific requirements, so make sure you’ve got your 1099s on hand when filing.
Many changes came with the Tax Cuts and Jobs Act of 2017. Keep these more significant child-related tax credits in mind as you prepare your taxes:
- Child tax credit
- Child and dependent care credit
- Earned income tax credit
- Education tax credits and the tuition and fees deduction
- 529 college savings accounts
No matter how old your kids are, if you can claim them as a dependent, your taxes are impacted. If you’re uncertain or have questions, contact a local certified tax expert or CPA for help.