The Tax Blotter: May 1, 2019
Under the Tax Cuts and Jobs Act (TCJA), parents can no longer claim dependency exemptions for qualifying children, effective for 2018 through 2025. But you may be able to offset this loss with certain tax credits.
May. 01, 2019
Under the Tax Cuts and Jobs Act (TCJA), parents can no longer claim dependency exemptions for qualifying children, effective for 2018 through 2025. But you may be able to offset this loss with certain tax credits.
Watch over the kiddies. If you incur expenses for caring for your under-age-13 children during the summer months, you may claim the dependent care credit. Generally, the maximum credit for the year is $600 for one child and $1,200 for two or more children. This credit covers expenses allowing you and spouse to be gainfully employed – such as day care centers, babysitters and even summer day camp (but not overnight camp).
Support older children. The TCJA improves and expands the Child Tax Credit (CTC) for qualifying children under age 17. First, the credit is doubled from $1,000 to $2,000, of which $1,400 is now refundable. Second, the income levels for phasing out the CTC are raised substantially. Third, you can now claim a $500 nonrefundable credit for qualifying dependents age-17-or-over, like high school seniors and college students.
Send dependents to school. Even though you can’t claim dependency exemptions for children in college, you may still benefit from one of two higher education credits for qualified expenses. The maximum American Opportunity Tax Credit (AOTC) is $2,500 per student per year while the maximum Lifetime Learning Credit (LLC) is $2,000 per family per year. Generally, you can only claim one or the other. Caveat: Both of these tax credits are phased out based on income levels.